UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM 8-K
---------------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 2, 2008
FIRST MERCHANTS CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA
(State or other jurisdiction of incorporation)
0-17071 35-1544218
(Commission File Number) (IRS Employer Identification No.)
200 East Jackson Street
P.O. Box 792
Muncie, Indiana 47305-2814
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (765) 747-1500
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[X] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01. Entry into a Material Definitive Agreement.
On September 3, 2008, First Merchants Corporation ("First Merchants") and
Lincoln Bancorp ("Lincoln") jointly announced the signing of a definitive
agreement (the "Agreement") pursuant to which Lincoln will be merged with and
into First Merchants (the "Merger"). The Merger has been approved by the Boards
of Directors of each of Lincoln and First Merchants, but is conditioned upon the
approval of the Lincoln shareholders and certain regulatory authorities. The
Agreement provides that upon the effective date of the Merger (the "Effective
Time"), each shareholder of Lincoln may elect to receive either 0.7004 shares of
First Merchants' common stock (valued at $13.93 based on First Merchants'
September 2, 2008 closing price of $19.89 per share), or $15.76 in cash for each
Lincoln common share owned by such shareholder. However, no more than 3,576,417
shares of First Merchants' common stock and no more than $16,800,000 in cash may
be paid to the Lincoln shareholders in the Merger and there may be
re-allocations of cash and stock to certain Lincoln shareholders if either
threshold is exceeded. Based on the closing price of First Merchants' common
stock on September 2, 2008, the transaction has an aggregate value between $74
million and $77 million, depending upon the elections made by Lincoln
shareholders. The transaction is expected to be a tax-free stock exchange for
those Lincoln shareholders electing to receive First Merchants' common stock.
The Merger is subject to various contingencies, including the approval of the
holders of Lincoln's outstanding common shares and the receipt of certain
regulatory approvals.
The Agreement of Reorganization and Merger between First Merchants and
Lincoln dated September 2, 2008, is attached hereto as Exhibit 2.1 and
incorporated herein by reference.
This current report on Form 8-K, including the exhibit hereto, contains
forward-looking statements that involve risk and uncertainty. It should be noted
that a variety of factors could cause the company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the combined company's forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development, growth projections and results of the combined company's business
include, but are not limited to, the growth of the economy, interest rate
movements, timely development by the combined company of technology enhancements
for its products and operating systems, the impact of competitive products,
services and pricing, customer business requirements, legislation, acquisition
cost savings and revenue enhancements and similar matters. Readers of this
report are cautioned not to place undue reliance on forward-looking statements
which are subject to influence by the named risk factors and unanticipated
future events. Actual results, accordingly, may differ materially from
management expectations.
Item 7.01. Regulation FD Disclosure.
In connection with the execution of the Agreement, First Merchants and
Lincoln jointly issued a press release attached hereto as Exhibit 99.1 and
incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) (2.1) Agreement of Reorganization and Merger between First Merchants
Corporation and Lincoln Bancorp dated September 2, 2008.
(10.1) Press Release dated September 3, 2008
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATE: September 3, 2008.
FIRST MERCHANTS CORPORATION
By: /s/ Mark K. Hardwick
-----------------------
Mark K. Hardwick,
Executive Vice President and
Chief Financial Officer
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EXHIBIT INDEX
(2.1) Agreement of Reorganization and Merger between First Merchants
Corporation and Lincoln Bancorp dated September 2, 2008.
(10.1) Press Release dated September 3, 2008
<page>
EXHIBIT 2.1
AGREEMENT OF REORGANIZATION AND MERGER
BETWEEN
FIRST MERCHANTS CORPORATION
AND
LINCOLN BANCORP
THIS AGREEMENT OF REORGANIZATION AND MERGER (the "Agreement"), is entered
as of the 2nd day of September, 2008, by and between FIRST MERCHANTS
CORPORATION, an Indiana corporation ("First Merchants") and LINCOLN BANCORP, an
Indiana corporation ("Lincoln").
W I T N E S S E T H:
WHEREAS, First Merchants is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, with its principal place of
business in Muncie, Delaware County, Indiana and with First Merchants Bank of
Central Indiana, National Association, a national bank ("FMBCI") as its
wholly-owned subsidiary;
WHEREAS, Lincoln is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended, with its principal place of business in
Plainfield, Hendricks County, Indiana, with Lincoln Bank, an Indiana state bank
(the "Bank") as its wholly-owned subsidiary;
WHEREAS, LF Portfolio Services, Inc. ("LF Portfolio") is a corporation duly
organized and existing under the laws of the State of Delaware and is a
wholly-owned subsidiary of the Bank (the "Bank", "LF Portfolio", "LF Service"
(as defined below) and "Citizens" (as defined below) are sometimes collectively
referred to herein as "Subsidiaries")
WHEREAS, it is the desire of First Merchants and Lincoln to effect a series
of transactions whereby (i) Lincoln will merge with and into First Merchants,
(ii) the Bank will merge with and into FMBCI, and (iii) LF Portfolio will become
a wholly-owned subsidiary of FMBCI; and
WHEREAS, a majority of the entire Boards of Directors of First Merchants,
FMBCI, Lincoln and the Bank have approved this Agreement, designated it as a
plan of reorganization within the provisions of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"), and authorized its
execution.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, First Merchants and Lincoln hereby make
this Agreement and prescribe the terms and conditions of the merger of Lincoln
with and into First Merchants and the Bank with and into FMBCI and the mode of
carrying the transactions into effect as follows:
<page>
SECTION 1
The Mergers
1.01 Lincoln Merger. Subject to the terms and conditions of this Agreement,
on the Effective Date (as defined in Section 11 hereof), Lincoln shall be merged
with and into First Merchants, which shall be the "Continuing Company" and shall
continue its corporate existence under the laws of the State of Indiana,
pursuant to the provisions of and with the effect provided in the Indiana
Business Corporation Law and particularly Indiana Code Section 23-1-40 (the
"Merger").
1.02 Bank Merger. Subject to the terms and conditions of this Agreement, on
the Effective Date, or another date subsequent thereto, the Bank shall be merged
with and into FMBCI pursuant to the terms and conditions of the Agreement and
Plan of Merger attached hereto as Exhibit A (the "Bank Merger Agreement") and
otherwise in accordance with 12 USC 215a and The Indiana Financial Institutions
Act, as amended, together with any regulations promulgated thereunder (the "Bank
Merger").
1.03 Right to Revise Mergers. First Merchants may, at any time, change the
method of effecting the Merger or the Bank Merger if and to the extent First
Merchants deems such change to be desirable, including, without limitation, to
provide for the merger of Lincoln into a wholly-owned subsidiary of First
Merchants and/or the merger of the Bank and LF Portfolio or either of them into
FMBCI or wholly-owned subsidiaries of First Merchants or FMBCI; provided,
however, that no such change, modification or amendment shall (a) alter or
change the amount or kind of consideration to be received by the shareholders of
Lincoln specified in Section 3 hereof as a result of the Merger, except in
accordance with the terms of Section 3 hereof; (b) adversely affect the tax
treatment to the shareholders of Lincoln; (c) alter or change any of First
Merchant's covenants specified in Section 8 hereof; or (d) materially impede or
delay receipt of any approvals referred to in this Agreement or the consummation
of the transactions contemplated by this Agreement.
SECTION 2
Effect Of The Merger
Upon the Merger becoming effective:
2.01 General Description. The separate existence of Lincoln shall cease and
the Continuing Company shall possess all of the assets of Lincoln and all of its
rights, privileges, immunities, powers, and franchises and shall be subject to
and assume all of the duties and liabilities of Lincoln.
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2.02 Name, Offices, and Management. The name of the Continuing Company
shall continue to be "First Merchants Corporation." Its principal office shall
be located at 200 E. Jackson Street, Muncie, Indiana. Except as otherwise
provided in Section 8.07 hereof, the Board of Directors of the Continuing
Company, until such time as their successors have been elected and qualified,
shall consist of the current Board of Directors of First Merchants. The officers
of First Merchants immediately prior to the Effective Date shall continue as the
officers of the Continuing Company.
2.03 Capital Structure. The amount of capital stock of the Continuing
Company shall not be less than the capital stock of First Merchants immediately
prior to the Effective Date increased by the amount of capital stock issued in
accordance with Section 3 hereof.
2.04 Articles of Incorporation and Bylaws. The Articles of Incorporation
and the Bylaws of the Continuing Company shall be those of First Merchants
immediately prior to the Effective Date until the same shall be further amended
as provided by law.
2.05 Assets and Liabilities. The title to all assets, real estate and other
property owned by First Merchants and Lincoln shall vest in the Continuing
Company without reversion or impairment. All liabilities of Lincoln shall be
assumed by the Continuing Company.
2.06 Additional Actions. If, at any time after the Effective Date, the
Continuing Company shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable
(a) to vest, perfect or confirm, of record or otherwise, in the Continuing
Company its right, title or interest in, to or under any of the rights,
properties or assets of Lincoln or the Subsidiaries, or (b) otherwise carry out
the purposes of this Agreement, Lincoln and the Subsidiaries and their
respective officers and directors shall be deemed to have granted to the
Continuing Company an irrevocable power of attorney to execute and deliver all
such deeds, assignments or assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Continuing Company and otherwise to carry out the
purposes of this Agreement, and the officers and directors of the Continuing
Company are authorized in the name of Lincoln or the Subsidiaries or otherwise
to take any and all such action.
SECTION 3
Consideration To Be
Distributed To Shareholders Of Lincoln
3.01 Consideration. Upon and by reason of the Merger becoming effective,
the shareholders of Lincoln of record on the Effective Date shall be entitled to
receive in exchange for the Lincoln common shares held and at their election
(subject to the limitations and prorations set forth in this Section 3) either
(i) 0.7004 (the "Conversion Ratio") shares of First Merchants' common stock for
each Lincoln common share held ("Share Option"), or (ii) cash in the amount of
$15.76 for each share of Lincoln's common stock held ("Cash Option"), subject to
the provisions and limitations of Section 3.07. A Lincoln shareholder shall be
entitled to elect the Share Option for all shares held of record, the Cash
Option for all shares held of record or the Share Option for a portion of the
shares held of record and the Cash Option for a portion of the shares held of
record. The Conversion Ratio shall be subject to adjustment as set forth in
Sections 3.03 and 3.04.
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3.02 No Fractional First Merchants Common Shares. Certificates for
fractional shares of common stock of First Merchants shall not be issued in
respect of fractional interests arising from the Conversion Ratio. Each Lincoln
shareholder who would otherwise have been entitled to a fraction of a First
Merchants share, upon surrender of all such shareholder's certificates
representing Lincoln's common shares, shall be paid in cash (without interest)
in an amount equal to the fraction of the First Merchants Average Price (as
defined below). No such shareholder of Lincoln shall be entitled to dividends,
voting rights or any other rights in respect of any fractional share.
3.03 Recapitalization. If, between the date of this Agreement and the
Effective Date, First Merchants issues a stock dividend with respect to its
shares of common stock, combines, subdivides, or splits up its outstanding
shares or takes any similar recapitalization action, then the Conversion Ratio
shall be adjusted so that each Lincoln shareholder electing the Share Option
shall receive such number of First Merchants shares as represents the same
percentage of outstanding shares of First Merchants common stock at the
Effective Date as would have been represented by the number of shares such
shareholder would have received if the recapitalization had not occurred.
3.04 Termination Rights.
(a) As used in this Section 3.04 and Section 7.11, the term "First
Merchants Average Price" shall mean the average of the closing price of the
common stock of First Merchants as reported in Bloomberg, L.P. for the
twenty (20) days that First Merchants common stock trades on NASDAQ
preceding the fifth (5th) calendar day prior to the Effective Date (the
"Determination Date"). The First Merchants Average Price and the dollar
amounts set forth in Sections 3.04(b) and 3.04(c) shall be appropriately
and proportionately adjusted to reflect any share adjustment as
contemplated by Section 3.03 hereof.
(b) Lincoln may terminate this Agreement if its Board of Directors so
determines by a vote of a majority of the members of its entire Board of
Directors if the First Merchants Average Price shall be less than $16.50;
subject to the following two provisions. If Lincoln elects to exercise its
right of termination pursuant to the immediately preceding sentence, it
shall give written notice to First Merchants within forty-eight (48) hours
of the Determination Date. Within three business days after the date of
receipt of such notice, First Merchants shall have the option of adjusting
the Conversion Ratio to equal a number equal to a quotient, the numerator
of which is the product of $16.50 and the Conversion Ratio (as then in
effect) and the denominator of which is the First Merchants Average Price.
If First Merchants makes an election contemplated by the preceding
sentence, it shall give prompt written notice to Lincoln of such election
and the revised Conversion Ratio, whereupon no termination shall have
occurred pursuant to this Section 3.04(b) and this Agreement shall remain
in effect in accordance with its terms (except as the Conversion Ratio
shall have been so modified), and any references in this Agreement to
"Conversion Ratio" shall thereafter be deemed to refer to the Conversion
Ratio as adjusted pursuant to this Section 3.04(b).
<page>
(c) First Merchants may terminate this Agreement if its Board of
Directors so determines by a vote of a majority of the members of its
entire Board of Directors if the First Merchants Average Price shall be
greater than $30.00; subject to the following two provisions. If First
Merchants elects to exercise its right of termination pursuant to the
immediately preceding sentence, it shall give written notice to Lincoln
within forty-eight (48) hours of the Determination Date. Within three
business days after the date of receipt of such notice, Lincoln shall have
the option of adjusting the Conversion Ratio to equal a number equal to a
quotient, the numerator of which is the product of $30.00 and the
Conversion Ratio (as then in effect) and the denominator of which is the
First Merchants Average Price. If Lincoln makes an election contemplated by
the preceding sentence, it shall give prompt written notice to First
Merchants of such election and the revised Conversion Ratio, whereupon no
termination shall have occurred pursuant to this Section 3.04(c) and this
Agreement shall remain in effect in accordance with its terms (except as
the Conversion Ratio shall have been so modified), and any references in
this Agreement to "Conversion Ratio" shall thereafter be deemed to refer to
the Conversion Ratio as adjusted pursuant to this Section 3.04(c).
3.05 Election. An election form (the "Election Form") shall be mailed to
each record holder of Lincoln's common shares as of the record date fixed for
the special shareholders' meeting at which the Merger will be submitted to a
vote of Lincoln's shareholders (the "Special Record Date"). In addition,
reasonable efforts will be made to make the Election Form available to all
persons who become shareholders of Lincoln between the Special Record Date and
the Election Deadline (as defined below). The deadline for receipt of such
Election Forms shall be the close of business on the first business day after
the special meeting at which the Merger will be submitted to a vote of Lincoln's
shareholders, or such other date mutually agreed to by Lincoln and First
Merchants (the "Election Deadline"). The Election Forms shall be mailed to each
record holder of Lincoln's common stock as of the Special Record Date along with
the proxy materials for the special shareholders' meeting at which the Merger
will be submitted to a vote of Lincoln's shareholders. The Election Form will
permit each holder of record of Lincoln's common stock as of the Special Record
Date to elect, subject to Section 3.07, to have all of such holder's shares
converted in the Merger into either the Share Option, the Cash Option or a
combination of the Share Option and the Cash Option. The Election Form shall
also permit direct deposit of cash in each holder's account in either the Bank
or FMBCI. An election shall be duly made by completing the Election Form and any
other required documents in accordance with the instructions set forth therein
and delivering them to the Election Agent (as defined below) or to such other
person or persons mutually agreed upon by Lincoln and First Merchants to receive
elections, to receive outstanding Lincoln shares, to deliver cash or cash and
shares of First Merchants' common stock and to carry out the other procedures
set forth herein, on or before 5:00 p.m., Eastern Time, on the Election
Deadline. Lincoln common shares as to which the Share Option has been elected
are referred to in this Agreement as "Stock Election Shares." Lincoln common
shares as to which the Cash Option has been elected are referred to in this
Agreement as "Cash Election Shares." Lincoln common shares as to which no valid
election has been made by the Election Deadline are referred to in this
Agreement as "Non-Electing Shares."
<page>
3.06 Election Agent. First Merchants and Lincoln hereby appoint American
Stock Transfer to act as agent (the "Election Agent") of Lincoln's shareholders
for the purposes of mailing and receiving the Election Forms, tabulating the
results and notifying First Merchants and Lincoln of the results.
3.07 Diversity of Payments.
(a) In the event (i) the number of Cash Election Shares would entitle
the holders of such shares (and Lincoln shareholders receiving cash
payments for fractional shares) to receive $16,800,000 or less in cash, and
(ii) the number of Stock Election Shares and Non-Electing Shares would
entitle the holders of such shares to receive 3,576,417 or less shares of
common stock of First Merchants (assuming for such purpose that all
Non-Electing Shares were treated as Stock Election Shares), then all Share
Option and Cash Option elections of the holders of Lincoln's common shares
shall be honored (each in its entirety) and all Non-Electing Shares shall
be treated as Stock Election Shares.
(b) In the event that the amount of cash to be received by holders of
Cash Election Shares and Lincoln shareholders receiving cash payments for
fractional shares pursuant to the terms of the Agreement would result in
cash payments of more than $16,800,000, the Cash Election Shares shall be
converted into Stock Election Shares pro rata (based on the number of Cash
Election Shares held by each Lincoln shareholder) until the total remaining
number of Cash Election Shares is such that the Merger will (i) result in
cash payments of no more than $16,800,000 for Cash Election Shares and
Lincoln shareholders receiving cash payments for fractional shares, and
(ii) satisfy the "continuity of interest" requirement applicable to
tax-free reorganizations under the Code. Cash Election Shares which are not
converted into Stock Election Shares shall remain as Cash Election Shares,
and all Non-Electing Shares shall be treated as Stock Election Shares.
(c) In the event that the number of shares of common stock of First
Merchants to be received by shareholders of Lincoln pursuant to the terms
of the Agreement in respect of Stock Election Shares and Non-Electing
Shares (which, for purposes of this calculation, shall be considered as
Stock Election Shares) exceeds 3,576,417, the Non-Electing Shares shall
first be converted into Cash Election Shares pro rata (based on the number
of Non-Electing Shares held by each Lincoln shareholder), and after all
Non-Electing Shares have been converted into Cash Election Shares, the
Stock Election Shares shall be converted into Cash Election Shares pro rata
(based on the number of Stock Election Shares held by each Lincoln
shareholder) until the total remaining number of Stock Election Shares
(and, if applicable, Non-Electing Shares) is such that the Merger will
(i) result in 3,576,417 shares of First Merchants common stock being issued
to the shareholders of Lincoln for Stock Election Shares and Non-Electing
Shares (if any have not been so converted) or such lesser number of shares
as is required in effecting the adjustment described in this subsection,
and (ii) satisfy the "continuity of interest" requirement applicable to
tax-free reorganizations under the Code. Stock Election Shares which are
not converted into Cash Election Shares shall remain as Stock Election
Shares, and all Non-Electing Shares which are not converted into Cash
Election Shares shall be treated as Stock Election Shares.
<page>
(d) Lincoln and First Merchants shall mutually determine the validity
of elections submitted by Lincoln's shareholders.
(e) A holder of Lincoln's shares that is a bank, trust company,
security broker-dealer or other recognized nominee, may submit one or more
Election Forms for the persons for whom it holds shares as nominee provided
that such bank, trust company, security broker-dealer or nominee certifies
to the satisfaction of Lincoln and First Merchants the names of the persons
for whom it is so holding shares (the "Beneficial Owners"). In such case,
each Beneficial Owner for whom an Election Form is submitted shall be
treated as a separate owner for purposes of the election procedure and
allocation of shares set forth herein.
(f) First Merchants and Lincoln may, upon mutual agreement, apply the
adjustments set forth in this Section 3.07 only to such extent and to such
number of Lincoln's shareholders as is necessary to accomplish the
objectives of this Section 3.07 and to assure that the Merger will qualify
as a tax-free reorganization.
(g) Certain shares of common stock of Lincoln are held under The
Lincoln Bank Employee Stock Ownership Plan and 401(k) Savings Plan and
Trust Agreement (the "ESOP"). The Cash Option or Share Option elected with
respect to the shares held by the ESOP shall be subject to the adjustments
described in Sections 3.07(b) and 3.07(c), but only to the extent that no
less than "Adequate Consideration" (as defined below) will be paid to the
ESOP for its Lincoln common shares. Accordingly, the ESOP will participate
in any pro rata adjustment required by Sections 3.07(b) and 3.07(c) until
such adjustment would otherwise cause the ESOP to receive less than
Adequate Consideration, and further adjustments will only be made among the
Lincoln shareholders other than the ESOP. For purposes of this subsection,
"Adequate Consideration" shall be as defined in section 3(18) of Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the
regulations promulgated thereunder. If the trustee of the ESOP desires
application of this subsection 3.07(g), it shall so instruct First
Merchants in writing on or before the Effective Date, along with its
written determination that failure to apply this subsection would result in
less than "Adequate Consideration" being delivered to the ESOP as provided
herein.
3.08 Distribution of First Merchants' Common Stock and Cash.
(a) Each share of common stock of First Merchants outstanding
immediately prior to the Effective Date shall remain outstanding unaffected
by the Merger.
(b) Following the Effective Date, First Merchants shall mail to each
Lincoln shareholder a letter of transmittal (the "Letter of Transmittal")
providing instructions as to the transmittal to the conversion agent,
American Stock Transfer (the "Conversion Agent"), of certificates
representing shares of Lincoln's common stock and the issuance of shares of
First Merchants' common stock and cash in exchange therefor pursuant to the
terms of this Agreement. Distribution of stock certificates representing
First Merchants' common stock and cash payments for Lincoln's common stock
and for fractional shares shall be made by First Merchants to each former
shareholder of Lincoln within fifteen (15) business days following the
later of the Effective Date or the date of such shareholder's delivery to
the Conversion Agent of such shareholder's certificates representing
Lincoln common shares, accompanied by a properly completed and executed
Letter of Transmittal. Interest shall not accrue or be payable with respect
to any cash payments.
<page>
(c) Following the Effective Date, stock certificates representing
Lincoln's common shares shall be deemed to evidence only the right to
receive cash and/or ownership of First Merchants' common stock (for all
corporate purposes other than the payment of dividends) and cash for
fractional shares, as applicable. No dividends or other distributions
otherwise payable subsequent to the Effective Date on stock of First
Merchants shall be paid to any shareholder entitled to receive the same
until such shareholder has surrendered such shareholder's certificates for
Lincoln's common shares to the Conversion Agent in exchange for
certificates representing First Merchants' common stock and/or cash. Upon
surrender or compliance with the provisions of Section 3.08(b), there shall
be paid to the record holder of the new certificate(s) evidencing shares of
First Merchants' common stock the amount of all dividends and other
distributions, without interest thereon, withheld with respect to such
common stock.
(d) At or after the Effective Date, there shall be no transfers on the
stock transfer books of Lincoln of any Lincoln common shares. If, after the
Effective Date, certificates are presented for transfer to Lincoln, such
certificates shall be cancelled and exchanged for the consideration set
forth in Section 3.01 hereof, as adjusted pursuant to the terms of this
Agreement.
(e) First Merchants shall be entitled to rely upon the stock transfer
books of Lincoln to establish the persons entitled to receive cash and
shares of common stock of First Merchants, which books, in the absence of
actual knowledge by First Merchants of any adverse claim thereto, shall be
conclusive with respect to the ownership of such stock.
(f) With respect to any certificate for Lincoln common shares which
has been lost, stolen, or destroyed, First Merchants shall be authorized to
issue common stock to the registered owner of such certificate upon receipt
of an affidavit of lost stock certificate, in form and substance
satisfactory to First Merchants, and upon compliance by the Lincoln's
shareholder with all procedures historically required by Lincoln in
connection with lost, stolen, or destroyed certificates.
SECTION 4
Dissenters' Rights Shareholders of Lincoln are not entitled to dissenters'
rights under Indiana Code Section 23-1-44, as amended, because the shares of
Lincoln common stock are traded on the NASDAQ Global Markets share exchange.
<page>
SECTION 5
Representations and
Warranties of Lincoln
Lincoln represents and warrants to First Merchants with respect to itself
and the Subsidiaries as follows (For the purposes of this Section, a "Disclosure
Letter" is defined as the letter referencing Section 5 of this Agreement which
shall be prepared and executed by an authorized executive officer of Lincoln and
delivered to and initialed by an authorized executive officer of First Merchants
contemporaneously with the execution of this Agreement.):
5.01 Organization and Authority. Lincoln is a corporation duly organized
and validly existing under the laws of the State of Indiana, the Bank is a bank
duly organized and validly existing under the laws of the State of Indiana and
LF Portfolio is a corporation duly organized and validly existing under the laws
of the State of Delaware. Lincoln, the Bank and Lincoln's other Subsidiaries
have the power and authority (corporate and otherwise) to conduct their
respective businesses in the manner and by the means utilized as of the date
hereof. Lincoln's only direct subsidiary is the Bank. Other than LF Portfolio
Services, Inc., a Delaware corporation, LF Service Corporation, an Indiana
corporation ("LF Service"), and Citizens Loan and Service Corporation, an
Indiana corporation ("Citizens"), which are wholly-owned Subsidiaries of the
Bank, Lincoln has no indirect Subsidiaries. The Bank is subject to primary
federal regulatory supervision and regulation by the Federal Deposit Insurance
Corporation.
5.02 Authorization.
(a) Lincoln has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder, subject to obtaining
certain required regulatory approvals and obtaining shareholder approval.
This Agreement, when executed and delivered, will have been duly authorized
and will constitute a valid and binding obligation of Lincoln, enforceable
in accordance with its terms except to the extent limited by insolvency,
reorganization, liquidation, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors' rights.
The Board of Directors of the Bank and Lincoln as its sole shareholder have
approved the Bank Merger pursuant to the terms and conditions of this
Agreement and the Bank Merger Agreement.
(b) Except as set forth in the Disclosure Letter, neither the
execution of this Agreement, nor the consummation of the transactions
contemplated hereby, does or will (i) conflict with, result in a breach of,
or constitute a default under Lincoln's or any Subsidiary's Articles of
Incorporation or By-Laws; (ii) conflict with, result in a breach of, or
constitute a default under any federal, foreign, state or local law,
statute, ordinance, rule, regulation or court or administrative order or
decree, or any note, bond, indenture, loan, mortgage, security agreement,
contract, arrangement or commitment, to which Lincoln or any Subsidiary is
subject or bound, the result of which would have a Material Adverse Effect;
(iii) result in the creation of, or give any person, corporation or entity
the right to create, any lien, charge, encumbrance, security interest, or
any other rights of others or other adverse interest upon any right,
property or asset of Lincoln or any of the Subsidiaries; (iv) terminate, or
give any person, corporation or entity the right to terminate, amend,
abandon, or refuse to perform, any note, bond, indenture, loan, mortgage,
security agreement, contract, arrangement or commitment to which Lincoln or
any of the Subsidiaries is subject or bound; or (v) accelerate or modify,
or give any party thereto the right to accelerate or modify, the time
within which, or the terms according to which, Lincoln or any of the
Subsidiaries is to perform any duties or obligations or receive any rights
or benefits under any note, bond, indenture, loan, mortgage, security
agreement, contract, arrangement or commitment.
<page>
For the purpose of this Agreement, and in relation to Lincoln, a
"Material Adverse Effect" means any effect that (i) is material and adverse
to the financial position, results of operations or business of Lincoln and
its Subsidiaries taken taken as a whole, or (ii) would materially impair
the ability of Lincoln to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
Merger and the other transactions contemplated by this Agreement; provided,
however, that Material Adverse Effect shall not be deemed to include the
impact of (a) changes in banking and similar laws of general applicability
to banks or their holding companies or interpretations thereof by courts or
governmental authorities, (b) changes in generally accepted accounting
principles or regulatory accounting requirements applicable to banks or
their holding companies generally, (c) any modifications or changes to
valuation policies and practices in connection with the Merger or
restructuring charges taken in connection with the Merger, in each case in
accordance with generally accepted accounting principles, (d) effects of
any action taken with the prior written consent of First Merchants, (e)
changes in the general level of interest rates (including the impact on
Lincoln's or the Bank's securities portfolios) or conditions or
circumstances relating to or that affect either the United States economy,
financial or securities markets or the banking industry, generally, (f)
changes resulting from expenses (such as legal, accounting and investment
bankers' fees) incurred in connection with this Agreement or the
transactions contemplated herein, including without limitation payment of
any amounts due to, or the provision of any benefits to, any officers or
employees under agreements, plans or other arrangements in existence of or
contemplated by this Agreement and disclosed to First Merchants, (g) the
impact of the announcement of this Agreement and the transactions
contemplated hereby, and compliance with this Agreement on the business,
financial condition or results of operations of Lincoln and its
Subsidiaries, and (h) the occurrence of any military or terrorist attack
within the United States or any of its possessions or offices; provided
that in no event shall a change in the trading price of the Lincoln Common
Stock, by itself, be considered to constitute a Material Adverse Effect on
Lincoln and its Subsidiaries taken as a whole (it being understood that the
foregoing proviso shall not prevent or otherwise affect a determination
that any effect underlying such decline has resulted in a Material Adverse
Effect).
(c) Other than the filing of Articles of Merger with the Indiana
Secretary of State for the Merger and the Bank Merger and in connection or
in compliance with the banking regulatory approvals contemplated by Section
9.04 and federal and state securities laws and the rules and regulations
promulgated thereunder, no notice to, filing with, authorization of,
exemption by, or consent or approval of, any public body or authority is
necessary for the consummation by Lincoln of the transactions contemplated
by this Agreement.
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(d) Other than those filings, authorizations, consents and approvals
referenced in Section 5.02(c) above and except as set forth in the
Disclosure Letter, no notice to, filing with, authorization of, exemption
by, or consent or approval of, any third party is necessary for the
consummation by Lincoln or the Bank of the transactions contemplated by
this Agreement.
5.03 Capitalization.
(a) As of the date of this Agreement, Lincoln had 20,000,000 shares of
common stock authorized, without par value, 5,319,731 shares of which are
issued and outstanding. Such issued and outstanding Lincoln common shares
have been duly and validly authorized by all necessary corporate action of
Lincoln, are validly issued, fully paid and nonassessable and have not been
issued in violation of any preemptive rights of any shareholders. Lincoln
has no capital stock authorized, issued or outstanding other than as
described in this Section 5.03(a) and, except as set forth in the
Disclosure Letter, Lincoln has no intention or obligation to authorize or
issue additional shares of its common stock.
(b) As of the date of this Agreement, the Bank has 1,000 shares of
common stock authorized, $.01 par value per share, 1,000 shares of which
are issued and outstanding and held by Lincoln. Such issued and outstanding
shares of Bank common stock have been duly and validly authorized by all
necessary corporate action of the Bank, are validly issued, fully paid and
nonassessable, and have not been issued in violation of any preemptive
rights of any Bank shareholders. Except as set forth in the Disclosure
Letter, all the issued and outstanding Bank common stock is owned by
Lincoln, free and clear of all liens, pledges, charges, claims,
encumbrances, restrictions, security interests, options and preemptive
rights and of all other rights of any other person, corporation or entity
with respect thereto. The Bank has no capital stock authorized, issued or
outstanding other than as described in this Section 5.03(b) and has no
intention or obligation to authorize or issue any other shares of capital
stock.
(c) All outstanding shares of capital stock of LF Portfolio are owned
directly by the Bank. Such shares have been duly and validly authorized by
all necessary corporate action, are validly issued, fully paid and
nonassessable, and have not been issued in violation of any preemptive
rights. Such shares are owned by the Bank, free and clear of any liens,
pledges, charges, claims, encumbrances, restrictions, security interests,
options and preemptive rights and of all other rights of any other person,
corporation or entity with respect thereto. LF Portfolio does not have any
other shares of capital stock authorized, issued or outstanding except as
set forth in the Disclosure Letter, and does not have any intention or
obligation to authorize or issue any other shares of capital stock.
(d) All outstanding shares of capital stock of LF Service and Citizens
are owned directly by the Bank. Such shares have been duly and validly
authorized by all necessary corporate action, are validly issued, fully
paid and nonassessable, and have not been issued in violation of any
preemptive rights. Such shares are owned by the Bank, free and clear of any
liens, pledges, charges, claims, encumbrances, restrictions, security
interests, options and preemptive rights and of all other rights of any
other person, corporation or entity with respect thereto. Neither LF
Service nor Citizens have any other shares of capital stock authorized,
issued or outstanding except as set forth in the Disclosure Letter, and
neither LF Service nor Citizens have any intention or obligation to
authorize or issue any other shares of capital stock.
<page>
(e) Except as set forth in the Disclosure Letter, there are no
options, commitments, calls, agreements, understandings, arrangements or
subscription rights regarding the issuance, purchase or acquisition of
capital stock, or any securities convertible into or representing the right
to purchase or otherwise receive the capital stock or any debt securities,
of Lincoln nor any Subsidiary by which Lincoln or any Subsidiary is or may
become bound. Neither Lincoln nor any Subsidiary has any outstanding
contractual or other obligation to repurchase, redeem or otherwise acquire
any of its respective outstanding shares of capital stock.
(f) Except as set forth in the Disclosure Letter, no person or entity
beneficially owns 5% or more of Lincoln's outstanding common shares.
5.04 Organizational Documents. The respective Articles of Incorporation and
By-Laws of Lincoln and each Subsidiary have been delivered to First Merchants
and represent true, accurate and complete copies of such corporate documents of
Lincoln and each Subsidiary in effect as of the date of this Agreement.
5.05 Compliance with Law. Except as set forth in the Disclosure Letter,
neither Lincoln nor any Subsidiary has engaged in any activity nor taken or
omitted to take any action which has resulted or, to the knowledge of "Lincoln's
Management" (as defined below) could reasonably be expected to result, in the
violation of any local, state, federal or foreign law, statute, rule, regulation
or ordinance or of any order, injunction, judgment or decree of any court or
government agency or body, the violation of which could reasonably be expected
to have a Material Adverse Effect. Except as set forth in the Disclosure Letter,
Lincoln and each Subsidiary possess all licenses, franchises, permits and other
authorizations necessary for the continued conduct of their respective
businesses without material interference or interruption and such licenses,
franchises, permits and authorizations shall be transferred to First Merchants
on the Effective Date without any restrictions or limitations thereon or the
need to obtain any consents of third parties. None of Lincoln or any of the
Subsidiaries are subject to any agreement or understanding with, or order and
directive of, any regulatory agency or government authority with respect to the
business or operations of Lincoln or any Subsidiary. Except as set forth in the
Disclosure Letter, the Bank has received no inquiries, claims or complaints
since January 1, 2003 from any regulatory agency or government authority
relating to its compliance with the Bank Secrecy Act, the Truth-in-Lending Act,
the Community Reinvestment Act, the Gramm-Leach-Bliley Act of 1999, the USA
Patriot Act, the International Money Laundering Abatement and Financial
Anti-Terrorism Act of 2001, the Sarbanes-Oxley Act of 2002 or any laws with
respect to the protection of the environment or the rules and regulations
promulgated thereunder. Except as set forth in the Disclosure Letter, Lincoln
has received no inquiries, claims or complaints since January 1, 2003 from any
regulatory agency or government authority relating to its compliance with any
securities, tax or employment laws applicable to Lincoln.
<page>
5.06 Accuracy of Statements. This Agreement, the Disclosure Letter and any
certificate required to be furnished by Lincoln or any Subsidiary to First
Merchants in connection with this Agreement or any of the transactions
contemplated hereby (including, without limitation, any information which shall
be supplied by Lincoln or any Subsidiary with respect to their businesses,
operations and financial condition for inclusion in the regulatory filings
relating to the Merger or the Bank Merger) do not or shall not contain any
untrue statement of a material fact or do not or shall not omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
5.07 Litigation and Pending Proceedings. Except as set forth in the
Disclosure Letter, there are no claims of any kind, nor any action, suits,
proceedings, arbitrations or investigations pending or to the knowledge of
Lincoln's Management threatened in any court or before any government agency or
body, arbitration panel or otherwise (nor does Lincoln's Management have any
knowledge of a basis for any claim, action, suit, proceeding, arbitration or
investigation) which could reasonably be expected to have a Material Adverse
Effect. There are no material uncured violations, criticisms or exceptions, or
violations with respect to which material refunds or restitutions may be
required, cited in any report, correspondence or other communication to Lincoln
or any Subsidiary as a result of an examination by any regulatory agency or
body.
5.08 Financial Statements.
(a) Lincoln's consolidated audited balance sheets as of the end of the
two fiscal years ended December 31, 2006 and 2007, the unaudited
consolidated balance sheet for the six months ended June 30, 2008 and the
related consolidated statements of income, shareholders' equity and cash
flows for the years or period then ended (hereinafter collectively referred
to as the "Financial Information") present fairly the consolidated
financial condition or position of Lincoln as of the respective dates
thereof and the consolidated results of operations of Lincoln for the
respective periods covered thereby and have been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis.
(b) All loans reflected in the Financial Information and which have
been made, extended or acquired since June 30, 2008 (i) have been made for
good, valuable and adequate consideration in the ordinary course of
business; (ii) constitute the legal, valid and binding obligation of the
obligor and any guarantor named therein; (iii) are evidenced by notes,
instruments or other evidences of indebtedness which are true, genuine and
what they purport to be; and (iv) to the extent that the Bank has a
security interest in collateral or a mortgage securing such loans, are
secured by perfected security interests or mortgages naming the Bank as the
secured party or mortgagee, except for such unperfected security interests
or mortgages naming the Bank as secured party or mortgagee which, on an
individual loan basis, would not materially adversely affect the value of
any such loan and the recovery of payment on any such loan if the Bank is
not able to enforce any such security interest or mortgage.
<page>
5.09 Absence of Certain Changes. Except for events and conditions relating
to the business and interest rate environment in general, the accrual or payment
of Merger-related expenses, or as set forth in the Disclosure Letter, since June
30 2008, no events have occurred, or to the knowledge of Lincoln, can reasonably
be expected to occur, which could reasonably be expected to have a Material
Adverse Effect. Between the period from June 30, 2008 to the date of this
Agreement, Lincoln and each Subsidiary have carried on their respective
businesses in the ordinary and usual course consistent with their past practices
(excluding the incurrence of fees and expenses of professional advisors related
to this Agreement and the transactions contemplated hereby) and there has not
been any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to Lincoln's
common shares (other than normal quarterly cash dividends) or any split,
combination or reclassification of any stock of Lincoln or any Subsidiary or any
issuance or the authorization of any issuance of any securities in respect of,
or in lieu of, or in substitution for Lincoln's common shares.
5.10 Absence of Undisclosed Liabilities. Neither Lincoln nor any Subsidiary
is a party to any agreement, contract, obligation, commitment, arrangement,
liability, lease or license which individually exceeds $100,000 per year or
which may not be terminated within one year from the date of this Agreement,
except (a) unfunded loan commitments made in the ordinary course of the Bank's
business consistent with past practices or (b) as set forth in the Disclosure
Letter, nor to the knowledge of Lincoln's Management does there exist any
circumstances resulting from transactions effected or to be effected or events
which have occurred or may occur or from any action taken or omitted to be taken
which could reasonably be expected to result in any such agreement, contract,
obligation, commitment, arrangement, liability, lease or license.
5.11 Title to Assets.
(a) Except as set forth in the Disclosure Letter, Lincoln and each
Subsidiary have good and marketable title in fee simple absolute to all
personal property reflected in the June 30, 2008 Financial Information,
good and marketable title to all other properties and assets which Lincoln
or any Subsidiary purports to own, good and marketable title to or right to
use by terms of any lease or contract all other property used in Lincoln's
or any Subsidiary's business, and good and marketable title to all property
and assets acquired since June 30, 2008, free and clear of all mortgages,
liens, pledges, restrictions, security interests, charges, claims or
encumbrances of any nature, except such minor imperfections of title, if
any, as do not materially detract from the value of or interfere with the
use of the property and which would not have a Material Adverse Effect.
(b) The operation by Lincoln or any Subsidiary of such properties and
assets is in compliance with all applicable laws, ordinances, rules and
regulations of any governmental authority or third party having
jurisdiction over such use except for such noncompliance that would not
have a Material Adverse Effect.
5.12 Loans and Investments.
(a) Except as set forth in the Disclosure Letter, there is no loan of
the Bank in excess of $250,000 that has been classified by Lincoln applying
bank regulatory examination standards as "Other Loans Specially Mentioned,"
"Substandard," "Doubtful" or "Loss," nor is there any loan of the Bank in
excess of $250,000 that has been identified by accountants or auditors
(internal or external) as having a significant risk of uncollectibility.
The Bank's loan watch list and all loans in excess of $250,000 that
Lincoln's Management has determined to be ninety (90) days or more past due
with respect to principal or interest or has placed on nonaccrual status
are set forth in the Disclosure Letter.
<page>
(b) Each of the reserves and allowances for possible loan losses and
the carrying value for real estate owned which are shown on the Financial
Information is, in the opinion of Lincoln's Management, adequate in all
material respects under the requirements of generally accepted accounting
principles applied on a consistent basis to provide for possible losses on
loans outstanding and real estate owned as of the date of such Financial
Information.
(c) Except as set forth in the Disclosure Letter, none of the
investments reflected in the Financial Information and none of the
investments made by Lincoln or any Subsidiary since June 30, 2008 is
subject to any restrictions, whether contractual or statutory, which
materially impairs the ability of Lincoln or any Subsidiary to dispose
freely of such investment at any time. Except as set forth in the
Disclosure Letter, neither Lincoln nor any Subsidiary is a party to any
repurchase agreements with respect to securities.
5.13 Employee Benefit Plans.
(a) The Disclosure Letter contains a list identifying each "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), which (i) is subject to any
provision of ERISA, and (ii) is currently maintained, administered or
contributed to by Lincoln or any Subsidiary and covers any employee,
director or former employee or director of Lincoln or any Subsidiary under
which Lincoln or any Subsidiary has any liability. The Disclosure Letter
also contains a list of all "employee benefit plans" as defined under ERISA
which have been terminated by Lincoln or any Subsidiary since January 1,
2002. Copies of such plans (and, if applicable, related trust agreements or
insurance contracts) and all amendments thereto and written interpretations
thereof have been furnished to First Merchants together with the three most
recent annual reports prepared in connection with any such plan and the
current summary plan descriptions. Such plans are hereinafter referred to
individually as a "Lincoln Employee Plan" and collectively as the "Lincoln
Employee Plans." The Lincoln Employee Plans which individually or
collectively would constitute an "employee pension benefit plan" as defined
in Section 3(2)(A) of ERISA are identified in the list referred to above.
(b) The Lincoln Employee Plans comply with and have been operated in
accordance with all applicable laws, regulations, rulings and other
requirements the breach or violation of which could materially affect
Lincoln, any Subsidiary, or a Lincoln Employee Plan. Each Lincoln Employee
Plan has been administered in substantial conformance with such
requirements and all reports and information required with respect to each
Lincoln Employee Plan has been timely filed or given.
<page>
(c)No "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code, for which no statutory or administrative
exemption exists, and no "reportable event," as defined in Section 4043(c)
of ERISA, for which a notice is required to be filed, has occurred with
respect to any Lincoln Employee Plan Neither Lincoln nor any Subsidiary has
any liability to the Pension Benefit Guaranty Corporation ("PBGC"), to the
Internal Revenue Service ("IRS"), to the Department of Labor ("DOL"), to
the Employee Benefits Security Administration, or to an employee or
Employee Plan beneficiary under Section 502 of ERISA, with respect to any
Lincoln Employee Plan.
(d) No "fiduciary," as defined in Section 3(21) of ERISA, of a Lincoln
Employee Plan has failed to comply with the requirements of Section 404 of
ERISA.
(e) Each of the Lincoln Employee Plans which is intended to be
qualified under Code Section 401(a) has been amended to comply in all
material respects with the applicable requirements of the Code, including
the Tax Reform Act of 1986, the Revenue Act of 1987, the Technical and
Miscellaneous Revenue Act of 1988, the Omnibus Budget Reconciliation Act of
1989, the Revenue Reconciliation Act of 1990, the Tax Extension Act of
1991, the Unemployment Compensation Amendments of 1992, the Omnibus Budget
Reconciliation Act of 1993, the Retirement Protection Act of 1994, the
Uruguay Round Agreements Act, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Small Business Job Protection Act of
1996, the Taxpayer Relief Act of 1997, the Internal Revenue Service
Restructuring and Reform Act of 1998, the Community Renewal Tax Relief Act
of 2000, the Economic Growth and Tax Relief Reconciliation Act of 2001, the
age 70-1/2 Code Section 401(a)(9) model amendments required to be adopted
by the end of the 2004 plan year, and any rules, regulations or other
requirements promulgated thereunder (the "Acts"). In addition, each such
Lincoln Employee Plan has been and is being operated in substantial
conformance with the applicable provisions of ERISA and the Code, as
amended by the Acts, including the automatic rollover rules which became
effective March 28, 2005. Except as set forth in the Disclosure Letter,
Lincoln and/or any Subsidiary, as applicable, sought and received favorable
determination letters from the IRS within the applicable remedial amendment
periods under Code Section 401(b), and has furnished to First Merchants
copies of the most recent IRS determination letters with respect to any
such Lincoln Employee Plan that is an "employee pension benefit plan" under
ERISA Section 3(2)(A).
(f) With respect to the Lincoln Bank Employee Stock Ownership Plan and
401(k) Savings Plan and Trust Agreement (the "ESOP"), except as set forth
on the Disclosure Letter: (i) the ESOP constitutes a qualified plan within
the meaning of Section 401(a) of the Code and the trust is exempt from
federal income tax under Section 501(a) of the Code; (ii) the ESOP has been
maintained and operated in substantial compliance in all material respects
with all applicable provisions of Sections 409 and 4975 of the Code and the
regulations and rulings thereunder; (iii) all contributions required by
such plan have been made or will be made on a timely basis; and (iv) no
termination, partial termination or discontinuance of contributions has
occurred without a determination by the IRS that such action does not
affect the tax-qualified status of such ESOP.
<page>
(g) Except as set forth in the Disclosure Letter, no Lincoln Employee
Plan has incurred an "accumulated funding deficiency," as determined under
Code Section 412 and ERISA Section 302.
(h) Except as set forth in the Disclosure Letter, no Lincoln Employee
Plan subject to Title IV of ERISA has been terminated or incurred a partial
termination (either voluntarily or involuntarily), in such a way as to
cause material additional liability to Lincoln.
(i) No claims against an Employee Plan, Lincoln or any Subsidiary
(other than normal benefit claims), have been asserted or threatened.
(j) Except as set forth in the Disclosure Letter, there is no
contract, agreement, plan or arrangement covering any employee, director or
former employee or director of Lincoln or any Subsidiary that, individually
or collectively, could give rise to the payment of any amount that would
not be deductible by reason of Section 280G or Section 162(a)(1) of the
Code.
(k) To the knowledge of Lincoln's Management, no event has occurred
that would cause the imposition of the tax described in Code Section 4980B.
To the knowledge of Lincoln's Management, all requirements of ERISA Section
601 have been met.
(l) The Disclosure Letter contains a list of each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including
any self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits
or deferred compensation, profit sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (i) is not a Lincoln Employee
Plan, (ii) was entered into, maintained or contributed to, as the case may
be, by Lincoln or any Subsidiary and (iii) covers any employee, director or
former employee or director of Lincoln or any Subsidiary. Such contracts,
plans and arrangements as are described above, copies or descriptions of
all of which have been furnished previously to First Merchants, are
hereinafter referred to collectively as the "Lincoln Benefit Arrangements."
Each of the Lincoln Benefit Arrangements has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and
all statutes, orders, rules and regulations which are applicable to such
Lincoln Benefit Arrangements.
(m) Except as set forth in the Disclosure Letter, neither Lincoln nor
any Subsidiary has any present or future liability in respect of
post-retirement health and medical benefits for former employees or
directors of Lincoln or any Subsidiary.
(n) Except as set forth in the Disclosure Letter, there has been no
amendment to, written interpretation or announcement (whether or not
written) by Lincoln or any Subsidiary relating to, or change in employee
participation or coverage under, any Lincoln Employee Plan or Lincoln
Benefit Arrangement administered by Lincoln or any Subsidiary which would
increase materially the expense of maintaining such Lincoln Employee Plans
or Lincoln Benefit Arrangements above the level of the expense incurred in
respect thereof for the fiscal year ended December 31, 2007.
<page>
(o) For purposes of this Section 5.13, references to Lincoln or any
Subsidiary are deemed to include (i) all predecessors of Lincoln or any
Subsidiary, (ii) any subsidiary of Lincoln or any Subsidiary, (iii) all
members of any controlled group (as determined under Code Section 414(b) or
(c)) that includes Lincoln or any Subsidiary, and (iv) all members of any
affiliated service group (as determined under Code Section 414(m) or (n))
that includes Lincoln or any Subsidiary.
(p) With respect to any nonqualified deferred compensation plan that
is subject to Code Section 409A, such plan has been identified on the
Disclosure Letter. The Disclosure Letter shall also identify to what extent
and in what years federal employment taxes (FICA/Medicare) have been paid
on any such nonqualified deferred compensation amounts, as required by Code
Section 3121(v) and the underlying regulations.
5.14 Obligations to Employees. Except as set forth in the Disclosure
Letter, all accrued obligations and liabilities of Lincoln and any Subsidiary,
whether arising by operation of law, by contract or by past custom, for payments
to trust or other funds, to any government agency or body or to any individual
director, officer, employee or agent (or his heirs, legatees or legal
representative) with respect to unemployment compensation or social security
benefits and all pension, retirement, savings, stock purchase, stock bonus,
stock ownership, stock option, restricted stock grant, stock appreciation rights
or profit sharing plan, any employment, deferred compensation, consultant, bonus
or collective bargaining agreement or group insurance contract or other
incentive, welfare or employee benefit plan or agreement maintained by Lincoln
or any Subsidiary for their current or former directors, officers, employees and
agents have been and are being paid to the extent required by law or by the plan
or contract, and adequate actuarial accruals and/or reserves for such payments
have been and are being made by Lincoln or any Subsidiary in accordance with
generally accepted accounting and actuarial principles, except where the failure
to pay any such accrued obligations or liabilities or to maintain adequate
accruals and/or reserves for payment thereof would not have a Material Adverse
Effect. Except as set forth in the Disclosure Letter, all obligations and
liabilities of Lincoln and the Subsidiaries, whether arising by operation of
law, by contract, or by past custom, for all forms of compensation which are or
may be payable to their current or former directors, officers, employees or
agents have been and are being paid, and adequate accruals and/or reserves for
payment therefor have been and are being made in accordance with generally
accepted accounting principles, except where the failure to pay any such
obligations and liabilities or to maintain adequate accruals and/or reserves for
payment thereof would not have a Material Adverse Effect. All accruals and
reserves referred to in this Section 5.14 are correctly and accurately reflected
and accounted for in the books, statements and records of Lincoln and the
Subsidiaries, except where the failure to correctly and accurately reflect and
account for such accruals and reserves would not have a Material Adverse Effect.
<page>
5.15 Taxes, Returns and Reports. Lincoln and the Subsidiaries have (a)`duly
filed all federal, state, local and foreign tax returns of every type and kind
required to be filed as of the date hereof, and each return is true, complete
and accurate in all material respects; (b) paid all material taxes, assessments
and other governmental charges due and payable or claimed to be due and payable
upon them or any of their income, properties or assets; and (c) not requested an
extension of time for any such payments (which extension is still in force).
Except for taxes not yet due and payable, the reserve for taxes on the Financial
Information is adequate to cover all of Lincoln's and the Subsidiaries' tax
liabilities (including, without limitation, income taxes and franchise fees)
that may become payable in future years with respect to any transactions
consummated prior to June 30, 2008. Neither Lincoln nor the Bank has or will
have, any liability for taxes of any nature for or with respect to the operation
of their business, including the assets of any subsidiary, from June 30, 2008,
up to and including the Effective Date, except to the extent reflected on their
Financial Information or on financial statements of Lincoln or any Subsidiary
subsequent to such date and as set forth in the Disclosure Letter. Neither
Lincoln nor any Subsidiary is currently under audit by any state or federal
taxing authority. Except as set forth in the Disclosure Letter, neither the
federal, state, nor local tax returns of Lincoln nor any Subsidiary have been
audited by any taxing authority during the past five (5) years.
5.16 Deposit Insurance. The deposits of the Bank are insured by the Federal
Deposit Insurance Corporation ("FDIC") in accordance with the Federal Deposit
Insurance Act, and the Bank has paid all premiums and assessments with respect
to such deposit insurance.
5.17 Reports. Since January 1, 2003, Lincoln and each Subsidiary have
timely filed all reports, registrations and statements, together with any
required amendments thereto, that Lincoln or any Subsidiary was required to file
with (i) the Indiana Department of Financial Institutions, (ii) the FDIC, or
(iii) any federal, state, municipal or local government, securities, banking,
environmental, insurance and other governmental or regulatory authority, and the
agencies and staffs thereof (collectively, the "Regulatory Authorities"), having
jurisdiction over the affairs of Lincoln or any Subsidiary except where such
failure would not have a Material Adverse Effect. All such reports filed by
Lincoln and the Subsidiaries complied in all material respects with all the
rules and regulations promulgated by the applicable Regulatory Authorities and
are true, accurate and complete and were prepared in conformity with generally
accepted regulatory accounting principles applied on a consistent basis. Except
as set forth in the Disclosure Letter, there is no unresolved violation with
respect to any report or statement filed by, or any examination of, Lincoln or
the Bank.
5.18 Absence of Defaults. Neither Lincoln nor any Subsidiary is in
violation of its charter documents or By-Laws or to the knowledge of Lincoln's
Management in default under any material agreement, commitment, arrangement,
loan, lease, insurance policy or other instrument, whether entered into in the
ordinary course of business or otherwise and whether written or oral, and there
has not occurred any event known to Lincoln's Management that, with the lapse of
time or giving of notice or both, would constitute such a default, except for
defaults which would not have a Material Adverse Effect.
5.19 Tax and Regulatory Matters. Neither Lincoln nor the Bank has taken or
agreed to take any action or has any knowledge of any fact or circumstance that
would (a) prevent the transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the Code or (b) materially
impede or delay receipt of any regulatory approval required for consummation of
the transactions contemplated by this Agreement.
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5.20 Real Property.
(a) A list of the locations of each parcel of real property owned by
Lincoln or the Bank (other than real property acquired in foreclosure or in
lieu of foreclosure in the course of the collection of loans and being held
by Lincoln or the Bank for disposition as required by law) is set forth in
the Disclosure Letter under the heading of "Owned Real Property" (such real
property being herein referred to as the "Owned Real Property"). A list of
the locations of each parcel of real property leased by Lincoln or the Bank
is also set forth in the Disclosure Letter under the heading of "Leased
Real Property" (such real property being herein referred to as the "Leased
Real Property"). Lincoln shall update the Disclosure Letter within ten (10)
days after acquiring or leasing any real property after the date hereof.
Collectively, the Owned Real Property and the Leased Real Property are
herein referred to as the "Real Property."
(b) There is no pending action involving Lincoln or the Bank as to the
title of or the right to use any of the Real Property.
(c) Except as set forth in the Disclosure Letter, neither Lincoln nor
the Bank has any interest in any other real property except interests as a
mortgagee or any real property acquired in foreclosure or in lieu of
foreclosure and being held for disposition as required by law.
(d) Except as set forth in the Disclosure Letter, (i) none of the
buildings, structures or other improvements located on the Owned Real
Property encroaches upon or over any adjoining parcel of real estate or any
easement or right-of-way or "setback" line and all such buildings,
structures; and (ii) improvements are located and constructed in conformity
with all applicable zoning ordinances and building codes.
(e) Except as set forth in the Disclosure Letter, (i) none of the
buildings, structures or improvements located on the Owned Real Property
are the subject of any official complaint or notice by any governmental
authority of violation of any applicable zoning ordinance or building code;
and (ii) there is no zoning ordinance, building code, use or occupancy
restriction or condemnation action or proceeding pending, or, to the best
knowledge of Lincoln's Management, threatened, with respect to any such
building, structure or improvement. Except as set forth in the Disclosure
Letter, the Real Property is in good condition for its intended purpose,
ordinary wear and tear excepted, and has been maintained (as to the Leased
Property, to the extent required to be maintained by Lincoln or the Bank)
in accordance with reasonable and prudent business practices applicable to
like facilities. The Owned Real Property has been used and operated in
compliance with all applicable laws, statutes, rules, regulations and
ordinances applicable thereto.
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(f) Except as may be reflected in the Financial Information or with
respect to such easements, liens, defects, encumbrances, real estate taxes
and assessments or other monetary obligations such as contributions to an
Owner's Association, as do not individually or in the aggregate materially
adversely affect the use or value of the Owned Real Property, Lincoln and
the Bank have, and at the Closing Date will have, good and marketable title
to their respective Owned Real Property, free and clear of all liens,
mortgages, security interests, encumbrances and restrictions of any kind or
character.
(g) Neither Lincoln nor the Bank has caused or allowed the generation,
treatment, storage, disposal or release at any Real Property of any Toxic
Substance, except in compliance with all applicable federal, state and
local laws and regulations and except as set forth in the Disclosure
Letter. "Toxic Substance" means any hazardous, toxic or dangerous
substance, pollutant, waste, gas or material, including, without
limitation, petroleum and petroleum products, metals, liquids, semi-solids
or solids, that are regulated under any federal, state or local statute,
ordinance, rule, regulation or other law pertaining to environmental
protection, contamination, quality, waste management or cleanup.
(h) Except as disclosed in the Disclosure Letter, (i) there are no
underground storage tanks located on, in or under any Owned Real Property;
and (ii) to the knowledge of Lincoln's Management, no such Owned Real
Property has previously contained an underground storage tank. Neither
Lincoln nor the Bank own or operate any underground storage tank at any
Leased Real Property and to the knowledge of Lincoln's Management no such
Leased Real Property has previously contained an underground storage tank.
No Owned Real Property is or has been, during Lincoln's ownership, listed
on the CERCLIS.
(i) To the knowledge of Lincoln's Management and as a result of any
act of Lincoln or the Bank, no Toxic Substance has been released, spilled,
discharged or disposed at, in, on or under any Owned Real Property nor to
the knowledge of Lincoln's Management are there any other conditions or
circumstances affecting any Owned Real Property, in each case, which would
pose a significant risk to the environment or the health or safety of
persons or otherwise pose a material risk of liability for remediation,
corrective action or clean-up.
(j) Except as disclosed in the Disclosure Letter, the Owned Real
Property is not "property" within the definition of Indiana Code
13-11-2-174. Neither Lincoln nor the Bank is required to provide a
"disclosure document" to First Merchants as a result of the Merger pursuant
to the Indiana Responsible Property Transfer Law (I.C. Section 13-25-3-1 et
seq.).
(k) To the knowledge of Lincoln's Management and as a result of any
act of Lincoln or the Bank, there are no mechanic's or materialman's liens
against the Leased Property, and no unpaid claims for labor performed,
materials furnished or services rendered in connection with constructing,
improving or repairing the Leased Property in respect of which liens may or
could be filed against the Leased Property.
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5.21 Securities Law Compliance. Lincoln's common shares are traded on the
NASDAQ Global Market under the symbol of "LNCB." Lincoln has complied in all
material respects with all state, federal or foreign securities laws, statutes,
rules, regulations or orders, injunctions or decrees of any government agency
relating thereto. Lincoln has complied in all material respects with all rules,
regulations, orders, injunctions or decrees of the National Association of
Securities Dealers, Inc. and all entities related or affiliated therewith and
has filed all reports and documents required to be filed with such entities.
Lincoln has filed all reports and other documents required to be filed by it
under the Securities Exchange Act of 1934 and the Securities Act of 1933,
including Lincoln's Annual Report on Form 10-K for the year ended December 31,
2007, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2008,
copies of which have previously been delivered to First Merchants. Except as
would not reasonably be expected to have Material Adverse Effect, all such
Securities and Exchange Commission filings were true, accurate and complete in
all material respects as of the dates of the filings, and no such filings
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements, at the time and in the light of
the circumstances under which they were made, not false or misleading.
5.22 Broker's or Finder's Fees. Except for Sandler O'Neill Partners, L.P.,
no agent, broker or other person acting on behalf of Lincoln or any Subsidiary
or under any authority of Lincoln or any Subsidiary is or shall be entitled to
any commission, broker's or finder's fee or any other form of compensation or
payment from any of the parties hereto, other than attorneys' or accountants'
fees, in connection with any of the transactions contemplated by this Agreement.
5.23 Shareholder Rights Plan. Except as otherwise provided in Lincoln's
Articles of Incorporation and By-Laws or set forth in the Disclosure Letter,
neither Lincoln nor the Bank has a shareholder rights plan or any other plan,
program or agreement involving, restricting, prohibiting or discouraging a
change in control or merger of Lincoln or the Bank or which may be considered an
anti-takeover mechanism.
5.24 Indemnification Agreements. Except as set forth in the Disclosure
Letter, neither Lincoln nor the Bank is a party to any indemnification,
indemnity or reimbursement agreement, contract, commitment or understanding to
indemnify any present or former director, officer, employee, shareholder or
agent against any liability or hold the same harmless from liability other than
as expressly provided in the Articles of Incorporation or By-Laws of Lincoln and
the Bank.
5.25 Bring Down of Representations and Warranties. All representations and
warranties of Lincoln and the Subsidiaries contained in this Section 5 shall be
true, accurate and correct on and as of the Effective Date except for those
representations and warranties which address matters only as of a particular
date (which shall have been true and correct as of such date) or have been
affected by the transactions contemplated by and specified within the terms of
this Agreement.
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5.26 Nonsurvival of Representations and Warranties. The representations and
warranties contained in this Section 5 shall expire on the Effective Date or the
earlier termination of this Agreement, and thereafter Lincoln and the
Subsidiaries and all directors and officers of Lincoln and the Subsidiaries
shall have no further liability with respect thereto unless a court of competent
jurisdiction should determine that any misrepresentation or breach of a warranty
was willfully or intentionally made or is deemed to be fraudulent.
<page>
SECTION 6
Representations and
Warranties of First Merchants
First Merchants hereby represents and warrants to Lincoln with respect to itself
and its Subsidiaries as follows (For the purposes of this Section, a "Disclosure
Letter" is defined as a letter referencing Section 6 of this Agreement which
shall be prepared and executed by an authorized executive officer of First
Merchants and delivered to and initialed by an authorized executive officer of
Lincoln contemporaneously with the execution of this Agreement.):
6.01 Organization and Authority. First Merchants is a corporation duly
organized and validly existing under the laws of the State of Indiana and FMBCI
is a national bank duly organized and validly existing under the laws of the
United States of America. Each has the corporate power and authority to conduct
its business in the manner and by the means utilized as of the date hereof.
First Merchants, FMBCI and the other Subsidiaries have the power and authority
(corporate or otherwise) to conduct their respective businesses in the manner
and by the means utilized as of the date hereof. First Merchants' only
subsidiaries are FMBCI and the other entities listed on Exhibit 21 to First
Merchants' Annual Report on Form 10-K as of and for the period ending December
31, 2007 (the "Subsidiaries"). FMBCI is subject to primary federal regulatory
supervision and regulation by the Office of the Comptroller of the Currency.
6.02 Authorization.
(a) First Merchants has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder subject to
the conditions precedent set forth in Section 9.02. The Agreement, when
executed and delivered, will have been duly authorized and will constitute
a valid and binding obligation of First Merchants, subject to the condition
precedent set forth in Section 9.02 hereof, enforceable in accordance with
its terms, except to the extent limited by insolvency, reorganization,
liquidation, readjustment of debt, or other laws of general application
relating to or affecting the enforcement of creditor's rights. The Board of
Directors of First Merchants and FMBCI have approved the Merger and Bank
Merger pursuant to the terms and conditions of this Agreement and the Bank
Merger Agreement.
(b) Except as set forth in the Disclosure Letter, neither the
execution of this Agreement, nor the consummation of the transactions
contemplated hereby, subject to the condition precedent set forth in
Section 9.02 hereof does or will (i) conflict with, result in a breach of,
or constitute a default under Articles of Incorporation or By-laws of First
Merchants or FMBCI; (ii) conflict with, result in a breach of, or
constitute a default under any federal, foreign, state, or local law,
statute, ordinance, rule, regulation, or court or administrative order or
decree, or any note, bond, indenture, loan, mortgage, security agreement,
contract, arrangement, or commitment, to which First Merchants or any
Subsidiary is subject or bound, the result of which would have a Material
Adverse Effect; (iii) result in the creation of, or give any person,
corporation or entity the right to create, any lien, charge, encumbrance,
security interest, or any other rights of others or other adverse interest
upon any right, property or asset of either First Merchants or any
Subsidiary; (iv) terminate, or give any person, corporation or entity the
right to terminate, amend, abandon, or refuse to perform, any note, bond,
indenture, mortgage, security agreement, contract, arrangement, or
commitment to which First Merchants or any Subsidiary is a party or by
which First Merchants or any Subsidiary is subject or bound; or
(v) accelerate or modify, or give any party thereto the right to accelerate
or modify, the time within which, or the terms according to which, First
Merchants or any Subsidiary is to perform any duties or obligations or
receive any rights or benefits under any note, bond, indenture, loan,
mortgage, security agreement, contract, arrangement, or commitment.
<page>
For the purpose of this Agreement, and in relation to First Merchants,
a "Material Adverse Effect" means any effect that (i) is material and
adverse to the financial position, results of operations or business of
First Merchants and its Subsidiaries taken as a whole, or (ii) would
materially impair the ability of First Merchants to perform its obligations
under this Agreement or otherwise materially threaten or materially impede
the consummation of the Merger and the other transactions contemplated by
this Agreement; provided, however, that Material Adverse Effect shall not
be deemed to include the impact of (a) changes in banking and similar laws
of general applicability to banks or their holding companies or
interpretations thereof by courts or governmental authorities, (b) changes
in generally accepted accounting principles or regulatory accounting
requirements applicable to banks or their holding companies generally, (c)
any modifications or changes to valuation policies and practices in
connection with the Merger or restructuring charges taken in connection
with the Merger, in each case in accordance with generally accepted
accounting principles, (d) effects of any action taken with the prior
written consent of Lincoln, (e) changes in the general level of interest
rates (including the impact on First Merchant's or FMBCI's securities
portfolios) or conditions or circumstances relating to or that affect the
United States economy, financial or securities markets or the banking
industry, generally, (f) changes resulting from expenses (such as legal,
accounting and investment bankers' fees) incurred in connection with this
Agreement or the transactions contemplated herein, (g) the impact of the
announcement of this Agreement and the transactions contemplated hereby,
and compliance with this Agreement on the business, financial condition or
results of operations of First Merchants and its Subsidiaries, and (h) the
occurrence of any military or terrorist attack within the United States or
any of its possessions or offices; provided that in no event shall a change
in the trading price of the First Merchants Common Stock, by itself, be
considered to constitute a Material Adverse Effect on First Merchants and
its Subsidiaries taken as a whole (it being understood that the foregoing
proviso shall not prevent or otherwise affect a determination that any
effect underlying such decline has resulted in a Material Adverse Effect).
(c) Other than in connection or in compliance with the provisions of
the Bank Holding Company Act of 1956, the Bank Merger Act, federal and
state securities laws, and applicable federal and Indiana banking statutes
and Indiana corporate statutes, all as amended, and the rules and
regulations promulgated thereunder, no notice to, filing with,
authorization of, exemption by, or consent or approval of, any public body
or authority is necessary for the consummation by First Merchants or FMBCI
of the transactions contemplated by this Agreement.
<page>
(d) Other than those filings, authorizations, consents and approvals
referenced in Section 6.02(c) above and filings and approvals relating to
the listing of the shares of First Merchants common stock to be issued in
the Merger on the NASDAQ Global Select Market, certain other filings and
approvals with NASDAQ relating to the change in the number of shares of
First Merchants outstanding as a result of the Merger, and except as set
forth on the Disclosure Letter, no notice to, filing with, authorization
of, execution by, or consent or approval of, any third party is necessary
for the consummation by First Merchants or FMBCI of the transactions
contemplated by this Agreement.
6.03 Capitalization.
(a) As of July 31, 2008, First Merchants had 50,000,000 shares of
common stock authorized, no par value, of which 18,272,085 shares were
issued and outstanding. Such issued and outstanding shares of First
Merchants' common stock have been duly and validly authorized by all
necessary corporate action of First Merchants, are validly issued, fully
paid and nonassessable and have not been issued in violation of any
preemptive rights of any shareholders.
(b) First Merchants has 500,000 shares of Preferred Stock authorized,
no par value, no shares of which have been issued and no commitments exist
to issue any of such shares.
(c) The shares of First Merchants' common stock to be issued pursuant
to the Merger will be duly authorized, fully paid, validly issued and
nonassessable and subject to no preemptive rights.
(d) As of the date of this Agreement, FMBCI has 114,000 shares of
common stock authorized, $10 par value per share, 114,000 shares of which
are issued and outstanding and held by First Merchants. Such issued and
outstanding shares of FMBCI common stock have been duly and validly
authorized by all necessary corporate action of the FMBCI, are validly
issued, fully paid and nonassessable, and have not been issued in violation
of any preemptive rights of any FMBCI shareholders. All the issued and
outstanding Bank common stock is owned by First Merchants, free and clear
of all liens, pledges, charges, claims, encumbrances, restrictions,
security interests, options and preemptive rights and of all other rights
of any other person, corporation or entity with respect thereto. FMBCI has
no capital stock authorized, issued or outstanding other than as described
in this Section 6.03(d) and has no intention or obligation to authorize or
issue any other shares of capital stock.
(e) Except as set forth in the Disclosure Letter, there are no
options, commitments, calls, agreements, understandings, arrangements or
subscription rights regarding the issuance, purchase or acquisition of
capital stock, or any securities convertible into or representing the right
to purchase or otherwise receive the capital stock or any debt securities,
of First Merchants nor FMBCI by which First Merchants or FMBCI is or may
become bound. Neither First Merchants nor FMBCI has any outstanding
contractual or other obligation to repurchase, redeem or otherwise acquire
any of its respective outstanding shares of capital stock.
<page>
(f) Except as set forth in the Disclosure Letter, no person or entity
beneficially owns 5% or more of First Merchants' outstanding common shares.
6.04 Organizational Documents. The respective Articles of Incorporation and
By-Laws of First Merchants and FMBCI have been delivered to Lincoln and
represent true, accurate and complete copies of such corporate documents of
First Merchants and FMBCI in effect as of the date of this Agreement.
6.05 Compliance with Law. Except as set forth in the Disclosure Letter,
neither First Merchants nor any Subsidiary has engaged in any activity nor taken
or omitted to take any action which has resulted or, to the knowledge of "First
Merchants' Management" (as defined below) could reasonably be expected to
result, in the violation of any local, state, federal or foreign law, statute,
rule, regulation or ordinance or of any order, injunction, judgment or decree of
any court or government agency or body, the violation of which could reasonably
be expected to have a Material Adverse Effect. Except as set forth in the
Disclosure Letter, First Merchants and each Subsidiary possess all licenses,
franchises, permits and other authorizations necessary for the continued conduct
of their respective businesses without material interference or interruption.
Neither First Merchants nor any of the Subsidiaries are subject to any agreement
or understanding with, or order and directive of, any regulatory agency or
government authority with respect to the business or operations of First
Merchants or FMBCI. Except as set forth in the Disclosure Letter, FMBCI has
received no inquiries, claims or complaints since January 1, 2003 from any
regulatory agency or government authority relating to its compliance with the
Bank Secrecy Act, the Truth-in-Lending Act, the Community Reinvestment Act, the
Gramm-Leach-Bliley Act of 1999, the USA Patriot Act, the International Money
Laundering Abatement and Financial Anti-Terrorism Act of 2001, the
Sarbanes-Oxley Act of 2002 or any laws with respect to the protection of the
environment or the rules and regulations promulgated thereunder. Except as set
forth in the Disclosure Letter, First Merchants has received no inquiries,
claims or complaints since January 1, 2003 from any regulatory agency or
government authority relating to its compliance with any securities, tax or
employment laws applicable to First Merchants.
6.06 Accuracy of Statements. This Agreement, the Disclosure Letter and any
certificate required to be furnished by First Merchants or any Subsidiary to
Lincoln in connection with this Agreement or any of the transactions
contemplated hereby (including, without limitation, any information which shall
be supplied by First Merchants or any Subsidiary with respect to their
businesses, operations and financial condition for inclusion in the regulatory
filings relating to the Merger or the Bank Merger) do not or shall not contain
any untrue statement of a material fact or do not or shall not omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
6.07 Litigation and Pending Proceedings. Except as set forth in the
Disclosure Letter, there are no claims of any kind, nor any action, suits,
proceedings, arbitrations or investigations pending or to the knowledge of First
Merchants' Management threatened in any court or before any government agency or
body, arbitration panel or otherwise (nor does First Merchants' Management have
any knowledge of a basis for any claim, action, suit, proceeding, arbitration or
investigation) which could reasonably be expected to have a Material Adverse
Effect. There are no material uncured violations, criticisms or exceptions, or
violations with respect to which material refunds or restitutions may be
required, cited in any report, correspondence or other communication to First
Merchants or FMBCI as a result of an examination by any regulatory agency or
body.
<page>
6.08 Financial Statements.
(a) First Merchants' consolidated audited balance sheets as of the end
of the two fiscal years ended December 31, 2006 and 2007, the unaudited
consolidated balance sheet for the six months ended June 30, 2008 and the
related consolidated statements of income, shareholders' equity and cash
flows for the years or period then ended (hereinafter collectively referred
to as the "First Merchants Financial Information") present fairly the
consolidated financial condition or position of First Merchants as of the
respective dates thereof and the consolidated results of operations of
First Merchants for the respective periods covered thereby and have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis.
(b) All loans reflected in the First Merchants Financial Information
and which have been made, extended or acquired since June 30, 2008 (i) have
been made for good, valuable and adequate consideration in the ordinary
course of business; (ii) constitute the legal, valid and binding obligation
of the obligor and any guarantor named therein; (iii) are evidenced by
notes, instruments or other evidences of indebtedness which are true,
genuine and what they purport to be; and (iv) to the extent that FMBCI has
a security interest in collateral or a mortgage securing such loans, are
secured by perfected security interests or mortgages naming FMBCI as the
secured party or mortgagee, except for such unperfected security interests
or mortgages naming FMBCI as secured party or mortgagee which, on an
individual loan basis, would not materially adversely affect the value of
any such loan and the recovery of payment on any such loan if FMBCI is not
able to enforce any such security interest or mortgage.
6.09 Absence of Certain Changes. Except for events and conditions relating
to the business and interest rate environment in general, the accrual or payment
of Merger-related expenses, or as set forth in the Disclosure Letter, since June
30, 2008, no events have occurred, or to the knowledge of First Merchants'
Management, can reasonably be expected to occur, which could reasonably be
expected to have a Material Adverse Effect. Between the period from June 30,
2008 to the date of this Agreement, First Merchants and each Subsidiary have
carried on their respective businesses in the ordinary and usual course
consistent with their past practices (excluding the incurrence of fees and
expenses of professional advisors related to this Agreement and the transactions
contemplated hereby) and there has not been any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to First Merchants' common shares (other than normal
quarterly cash dividends) or any split, combination or reclassification of any
stock of First Merchants or any Subsidiary or any issuance or the authorization
of any issuance of any securities in respect of, or in lieu of, or in
substitution for First Merchants' common shares.
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6.10 Absence of Undisclosed Liabilities. Neither First Merchants nor any
Subsidiary is a party to any agreement, contract, obligation, commitment,
arrangement, liability, lease or license which individually exceeds $100,000 per
year or which may not be terminated within one year from the date of this
Agreement, except (a) unfunded loan commitments made in the ordinary course of
FMBCI's business consistent with past practices or (b) as set forth in the
Disclosure Letter, nor to the knowledge of First Merchants' Management does
there exist any circumstances resulting from transactions effected or to be
effected or events which have occurred or may occur or from any action taken or
omitted to be taken which could reasonably be expected to result in any such
agreement, contract, obligation, commitment, arrangement, liability, lease or
license.
6.11 Title to Assets.
(a) Except as set forth in the Disclosure Letter, First Merchants and
each Subsidiary have good and marketable title in fee simple absolute to
all personal property reflected in the June 30, 2008 Financial Information,
good and marketable title to all other properties and assets which First
Merchants or any Subsidiary purports to own, good and marketable title to
or right to use by terms of any lease or contract all other property used
in First Merchants' or any Subsidiary's business, and good and marketable
title to all property and assets acquired since June 30, 2008, free and
clear of all mortgages, liens, pledges, restrictions, security interests,
charges, claims or encumbrances of any nature, except such minor
imperfections of title, if any, as do not materially detract from the value
of or interfere with the use of the property and which would not have a
Material Adverse Effect.
(b) The operation by First Merchants or any Subsidiary of its
furniture, fixtures, machinery, equipment, computer software and hardware,
and all other tangible personal property is in compliance with all
applicable laws, ordinances, rules and regulations of any governmental
authority or third party having jurisdiction over such use except for such
noncompliance that would not have a Material Adverse Effect.
6.12 Loans and Investments.
(a) Except as set forth in the Disclosure Letter, there is no loan of
any other Subsidiary in excess of $250,000 that has been classified by
First Merchants applying bank regulatory examination standards as "Other
Loans Specially Mentioned," "Substandard," "Doubtful" or "Loss," nor is
there any loan of FMBCI in excess of $250,000 that has been identified by
accountants or auditors (internal or external) as having a significant risk
of uncollectibility. Any bank Subsidiary's loan watch list and all loans in
excess of $250,000 that First Merchants' Management has determined to be
ninety (90) days or more past due with respect to principal or interest or
has placed on nonaccrual status are set forth in the Disclosure Letter.
(b) Each of the reserves and allowances for possible loan losses and
the carrying value for real estate owned which are shown on the Financial
Information is, in the opinion of First Merchants' Management, adequate in
all material respects under the requirements of generally accepted
accounting principles applied on a consistent basis to provide for possible
losses on loans outstanding and real estate owned as of the date of such
Financial Information.
<page>
(c) Except as set forth in the Disclosure Letter, none of the
investments reflected in the Financial Information and none of the
investments made by First Merchants or any Subsidiary since June 30, 2008
is subject to any restrictions, whether contractual or statutory, which
materially impairs the ability of First Merchants or any Subsidiary to
dispose freely of such investment at any time. Except as set forth in the
Disclosure Letter, neither First Merchants nor any Subsidiary is a party to
any repurchase agreements with respect to securities.
6.13 Employee Benefit Plans.
(a) The Disclosure Letter contains a list identifying each "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), which (i) is subject to any
provision of ERISA, and (ii) is currently maintained, administered or
contributed to by First Merchants or any Subsidiary and covers any
employee, director or former employee or director of First Merchants or any
Subsidiary under which First Merchants or any Subsidiary has any liability.
The Disclosure Letter also contains a list of all "employee benefit plans"
as defined under ERISA which have been terminated by First Merchants or any
Subsidiary since January 1, 2002. Copies of such plans (and, if applicable,
related trust agreements or insurance contracts) and all amendments thereto
and written interpretations thereof have been furnished to Lincoln together
with the three most recent annual reports prepared in connection with any
such plan and the current summary plan descriptions. Such plans are
hereinafter referred to individually as a "First Merchants Employee Plan"
and collectively as the "First Merchants Employee Plans." The First
Merchants Employee Plans which individually or collectively would
constitute an "employee pension benefit plan" as defined in Section 3(2)(A)
of ERISA are identified in the list referred to above.
(b) The First Merchants Employee Plans comply with and have been
operated in accordance with all applicable laws, regulations, rulings and
other requirements the breach or violation of which could materially affect
First Merchants, any Subsidiary, or an First Merchants Employee Plan. Each
First Merchants Employee Plan has been administered in substantial
conformance with such requirements and all reports and information required
with respect to each First Merchants Employee Plan has been timely filed or
given.
(c) No "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code, for which no statutory or administrative
exemption exists, and no "reportable event," as defined in Section 4043(c)
of ERISA, for which a notice is required to be filed, has occurred with
respect to any First Merchants Employee Plan. Neither First Merchants nor
any Subsidiary has any liability to the PBGC, to the IRS, to the DOL, to
the Employee Benefits Security Administration, or to an employee or First
Merchants Employee Plan beneficiary under Section 502 of ERISA, with
respect to any First Merchants Employee Plan.
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(d) No "fiduciary," as defined in Section 3(21) of ERISA, of a First
Merchants Employee Plan has failed to comply with the requirements of
Section 404 of ERISA.
(e) Each of the First Merchants Employee Plans which is intended to be
qualified under Code Section 401(a) has been amended to comply in all
material respects with the applicable requirements of the Code, including
the Tax Reform Act of 1986, the Revenue Act of 1987, the Technical and
Miscellaneous Revenue Act of 1988, the Omnibus Budget Reconciliation Act of
1989, the Revenue Reconciliation Act of 1990, the Tax Extension Act of
1991, the Unemployment Compensation Amendments of 1992, the Omnibus Budget
Reconciliation Act of 1993, the Retirement Protection Act of 1994, the
Uruguay Round Agreements Act, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Small Business Job Protection Act of
1996, the Taxpayer Relief Act of 1997, the Internal Revenue Service
Restructuring and Reform Act of 1998, the Community Renewal Tax Relief Act
of 2000, the Economic Growth and Tax Relief Reconciliation Act of 2001, the
age 70-1/2 Code Section 401(a)(9) model amendments required to be adopted
by the end of the 2004 plan year, and any rules, regulations or other
requirements promulgated thereunder (the "Acts"). In addition, each such
First Merchants Employee Plan has been and is being operated in substantial
conformance with the applicable provisions of ERISA and the Code, as
amended by the Acts, including the automatic rollover rules which became
effective March 28, 2005. Except as set forth in the Disclosure Letter,
First Merchants and/or any Subsidiary, as applicable, sought and received
favorable determination letters from the IRS within the applicable remedial
amendment periods under Code Section 401(b), and has furnished to Lincoln
copies of the most recent IRS determination letters with respect to any
such First Merchants Employee Plan that is an "employee pension benefit
plan" under ERISA Section 3(2)(A).
(f) Except as set forth in the Disclosure Letter, no First Merchants
Employee Plan has incurred an "accumulated funding deficiency," as
determined under Code Section 412 and ERISA Section 302.
(g) Except as set forth in the Disclosure Letter, no First Merchants
Employee Plan subject to Title IV of ERISA has been terminated or incurred
a partial termination (either voluntarily or involuntarily), in such a way
as to cause material additional liability to First Merchants.
(h) No claims against a First Merchants Employee Plan, First Merchants
or any Subsidiary (other than normal benefit claims), have been asserted or
threatened.
(i) Except as set forth in the Disclosure Letter, there is no
contract, agreement, plan or arrangement covering any employee, director or
former employee or director of First Merchants or any Subsidiary that,
individually or collectively, could give rise to the payment of any amount
that would not be deductible by reason of Section 280G or Section 162(a)(1)
of the Code.
(j) To the knowledge of First Merchants' Management, no event has
occurred that would cause the imposition of the tax described in Code
Section 4980B. To the knowledge of First Merchants' Management, all
requirements of ERISA Section 601 have been met.
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(k) The Disclosure Letter contains a list of each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including
any self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits
or deferred compensation, profit sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (i) is not an First Merchants
Employee Plan, (ii) was entered into, maintained or contributed to, as the
case may be, by First Merchants or any Subsidiary and (iii) covers any
employee, director or former employee or director of First Merchants or any
Subsidiary. Such contracts, plans and arrangements as are described above,
copies or descriptions of all of which have been furnished previously to
First Merchants, are hereinafter referred to collectively as the "First
Merchants Benefit Arrangements." Each of the First Merchants Benefit
Arrangements has been maintained in substantial compliance with its terms
and with the requirements prescribed by any and all statutes, orders, rules
and regulations which are applicable to such First Merchants Benefit
Arrangements.
(l) Except as set forth in the Disclosure Letter, neither First
Merchants nor any Subsidiary has any present or future liability in respect
of post-retirement health and medical benefits for former employees or
directors of First Merchants or FMBCI.
(m) Except as set forth in the Disclosure Letter, there has been no
amendment to, written interpretation or announcement (whether or not
written) by First Merchants or any Subsidiary relating to, or change in
employee participation or coverage under, any First Merchants Employee Plan
or First Merchants Benefit Arrangement administered by First Merchants or
any Subsidiary which would increase materially the expense of maintaining
such First Merchants Employee Plans or First Merchants Benefit Arrangements
above the level of the expense incurred in respect thereof for the fiscal
year ended December 31, 2007.
(n) For purposes of this Section 6.13, references to First Merchants
or any Subsidiary are deemed to include (i) all predecessors of First
Merchants or any Subsidiary, (ii) any subsidiary of First Merchants or any
Subsidiary, (iii) all members of any controlled group (as determined under
Code Section 414(b) or (c)) that includes First Merchants or any
Subsidiary, and (iv) all members of any affiliated service group (as
determined under Code Section 414(m) or (n)) that includes First Merchants
or any Subsidiary.
(o) With respect to any nonqualified deferred compensation plan that
is subject to Code Section 409A, such plan has been identified on the
Disclosure Letter. The Disclosure Letter shall also identify to what extent
and in what years federal employment taxes (FICA/Medicare) have been paid
on any such nonqualified deferred compensation amounts, as required by Code
Section 3121(v) and the underlying regulations.
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6.14 Obligations to Employees. Except as set forth in the Disclosure
Letter, all accrued obligations and liabilities of First Merchants and any
Subsidiary, whether arising by operation of law, by contract or by past custom,
for payments to trust or other funds, to any government agency or body or to any
individual director, officer, employee or agent (or his heirs, legatees or legal
representative) with respect to unemployment compensation or social security
benefits and all pension, retirement, savings, stock purchase, stock bonus,
stock ownership, stock option, restricted stock grant, stock appreciation rights
or profit sharing plan, any employment, deferred compensation, consultant, bonus
or collective bargaining agreement or group insurance contract or other
incentive, welfare or employee benefit plan or agreement maintained by First
Merchants or any Subsidiary for their current or former directors, officers,
employees and agents have been and are being paid to the extent required by law
or by the plan or contract, and adequate actuarial accruals and/or reserves for
such payments have been and are being made by First Merchants or any Subsidiary
in accordance with generally accepted accounting and actuarial principles,
except where the failure to pay any such accrued obligations or liabilities or
to maintain adequate accruals and/or reserves for payment thereof would not have
a Material Adverse Effect. Except as set forth in the Disclosure Letter, all
obligations and liabilities of First Merchants and any Subsidiary, whether
arising by operation of law, by contract, or by past custom, for all forms of
compensation which are or may be payable to their current or former directors,
officers, employees or agents have been and are being paid, and adequate
accruals and/or reserves for payment therefor have been and are being made in
accordance with generally accepted accounting principles, except where the
failure to pay any such obligations and liabilities or to maintain adequate
accruals and/or reserves for payment thereof would not have a Material Adverse
Effect. All accruals and reserves referred to in this Section 6.14 are correctly
and accurately reflected and accounted for in the books, statements and records
of First Merchants and any Subsidiary, except where the failure to correctly and
accurately reflect and account for such accruals and reserves would not have a
Material Adverse Effect.
6.15 Taxes, Returns and Reports. First Merchants and its Subsidiaries have
(a) duly filed all federal, state, local and foreign tax returns of every type
and kind required to be filed as of the date hereof, and each return is true,
complete and accurate in all material respects; (b) paid all material taxes,
assessments and other governmental charges due and payable or claimed to be due
and payable upon them or any of their income, properties or assets; and (c) not
requested an extension of time for any such payments (which extension is still
in force). Except for taxes not yet due and payable, the reserve for taxes on
the Financial Information is adequate to cover all of First Merchants' and the
Subsidiaries' tax liabilities (including, without limitation, income taxes and
franchise fees) that may become payable in future years with respect to any
transactions consummated prior to June 30, 2008. Neither First Merchants nor
FMBCI has or will have, any liability for taxes of any nature for or with
respect to the operation of their business, including the assets of any
Subsidiary, from June 30, 2008, up to and including the Effective Date, except
to the extent reflected on their Financial Information or on financial
statements of First Merchants or any Subsidiary subsequent to such date and as
set forth in the Disclosure Letter. Neither First Merchants nor any Subsidiary
is currently under audit by any state or federal taxing authority. Except as set
forth in the Disclosure Letter, neither the federal, state, nor local tax
returns of First Merchants nor any Subsidiary have been audited by any taxing
authority during the past five (5) years.
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6.16 Deposit Insurance. The deposits of FMBCI are insured by the FDIC in
accordance with the Federal Deposit Insurance Act, and FMBCI has paid all
premiums and assessments with respect to such deposit insurance.
6.17 Reports. First Merchants and each Subsidiary have timely filed all
reports, registrations and statements, together with any required amendments
thereto, that they were required to file with the Regulatory Authorities, having
jurisdiction over the affairs of First Merchants or any Subsidiary, except where
such failure would not have a Material Adverse Effect. All such reports filed by
First Merchants and the Subsidiaries complied in all material respects with all
the rules and regulations promulgated by the applicable Regulatory Authorities
and are true, accurate and complete and were prepared in conformity with
generally accepted regulatory accounting principles applied on a consistent
basis. Except as set forth in the Disclosure Letter, there is no unresolved
violation with respect to any report or statement filed by, or any examination
of, First Merchants or FMBCI.
6.18 Absence of Defaults. Neither First Merchants nor any Subsidiary is in
violation of its Articles of Incorporation or By-Laws or the knowledge of First
Merchants Management in default under any material agreement, commitment,
arrangement, lease, insurance policy or other instrument, whether entered into
in the ordinary course of business or otherwise and whether written or oral, and
there has not occurred any event known to First Merchants' Management that, with
the lapse of time or giving of notice or both, would constitute such a default,
except for defaults which would not have a Material Adverse Effect.
6.19 Tax and Regulatory Matters. Neither First Merchants nor FMBCI has
taken or agreed to take any action or has any knowledge of any fact or
circumstance that would (a) prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368 of the Code or
(b) materially impede or delay receipt of any regulatory approval required for
consummation of the transactions contemplated by this Agreement.
6.20 Real Property.
(a) A list of the locations of each parcel of real property owned by
First Merchants or FMBCI (other than real property acquired in foreclosure
or in lieu of foreclosure in the course of the collection of loans and
being held by First Merchants or FMBCI for disposition as required by law)
is set forth in the Disclosure Letter under the heading of "Owned Real
Property" (such real property being herein referred to as the "Owned Real
Property"). A list of the locations of each parcel of real property leased
by First Merchants or FMBCI is also set forth in the Disclosure Letter
under the heading of "Leased Real Property" (such real property being
herein referred to as the "Leased Real Property"). First Merchants shall
update the Disclosure Letter within ten (10) days after acquiring or
leasing any real property after the date hereof. Collectively, the Owned
Real Property and the Leased Real Property are herein referred to as the
"Real Property."
(b) There is no pending action involving First Merchants or FMBCI as
to the title of or the right to use any of the Real Property.
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(c) Neither First Merchants nor FMBCI has any interest in any other
real property except interests as a mortgagee, and except for any real
property acquired in foreclosure or in lieu of foreclosure and being held
for disposition as required by law.
(d) Except as set forth in the Disclosure Letter, (i) none of the
buildings, structures or other improvements located on the Owned Real
Property encroaches upon or over any adjoining parcel of real estate or any
easement or right-of-way or "setback" line and all such buildings,
structures; and (ii) improvements are located and constructed in conformity
with all applicable zoning ordinances and building codes.
(e) Except as set forth in the Disclosure Letter, (i) none of the
buildings, structures or improvements located on the Owned Real Property
are the subject of any official complaint or notice by any governmental
authority of violation of any applicable zoning ordinance or building code;
and (ii) there is no zoning ordinance, building code, use or occupancy
restriction or condemnation action or proceeding pending, or, to the best
knowledge of First Merchants' Management, threatened, with respect to any
such building, structure or improvement. Except as set forth in the
Disclosure Letter, the Real Property is in good condition for its intended
purpose, ordinary wear and tear excepted, and has been maintained (as to
the Leased Property, to the intent required to be maintained by First
Merchants or FMBCI) in accordance with reasonable and prudent business
practices applicable to like facilities. The Owned Real Property has been
used and operated in compliance with all applicable laws, statutes, rules,
regulations and ordinances applicable thereto.
(f) Except as may be reflected in the Financial Information or with
respect to such easements, liens, defects, encumbrances, real estate taxes
and assessments or other monetary obligations such as contributions to an
Owner's Association, as do not individually or in the aggregate materially
adversely affect the use or value of the Owned Real Property, First
Merchants and FMBCI have, and at the Closing Date will have, good and
marketable title to their respective Owned Real Property, free and clear of
all liens, mortgages, security interests, encumbrances and restrictions of
any kind or character.
(g) Neither First Merchants nor FMBCI has caused or allowed the
generation, treatment, storage, disposal or release at any Real Property of
any Toxic Substance, except in compliance with all applicable federal,
state and local laws and regulations and except as set forth in the
Disclosure Letter. "Toxic Substance" means any hazardous, toxic or
dangerous substance, pollutant, waste, gas or material, including, without
limitation, petroleum and petroleum products, metals, liquids, semi-solids
or solids, that are regulated under any federal, state or local statute,
ordinance, rule, regulation or other law pertaining to environmental
protection, contamination, quality, waste management or cleanup.
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(h) Except as disclosed in the Disclosure Letter, (i) there are no
underground storage tanks located on, in or under any Owned Real Property;
and (ii) to the knowledge of First Merchants' Management, no such Owned
Real Property has previously contained an underground storage tank. Neither
First Merchants nor FMBCI own or operate any underground storage tank at
any Leased Real Property and to the knowledge of First Merchants'
Management no such Leased Real Property has previously contained an
underground storage tank. No Owned Real Property is or has been, during
First Merchants' Management, listed on the CERCLIS.
(i) To the knowledge of First Merchants' Management and as a result of
any act of First Merchants or FMBCI, no Toxic Substance has been released,
spilled, discharged or disposed at, in, on or under any Owned Real Property
nor to the knowledge of First Merchants' Management are there any other
conditions or circumstances affecting any Real Property, in each case,
which would pose a significant risk to the environment or the health or
safety of persons or otherwise pose a material risk of liability for
remediation, corrective action or clean-up.
(j) Except as disclosed in the Disclosure Letter, the Owned Real
Property is not "property" within the definition of Indiana Code
13-11-2-174. Neither First Merchants nor FMBCI is required to provide a
"disclosure document" to Lincoln as a result of the Merger pursuant to the
Indiana Responsible Property Transfer Law (I.C. Section 13-25-3-1 et seq.).
(k) To the knowledge of First Merchants' Management and as a result of
any act of First Merchants or FMBCI, there are no mechanic's or
materialman's liens against the Leased Property, and no unpaid claims for
labor performed, materials furnished or services rendered in connection
with constructing, improving or repairing the Leased Property in respect of
which liens may or could be filed against the Leased Property.
6.21 Securities Law Compliance. First Merchants' common stock is traded on
the NASDAQ Global Select Market under the symbol of "FRME." First Merchants has
complied in all material respects with all state, federal or foreign securities
laws, statutes, rules, regulations or orders, injunctions or decrees of any
government agency relating thereto. First Merchants has complied in all material
respects with all rules, regulations, orders, injunctions or decrees of the
National Association of Securities Dealers, Inc. and all entities related or
affiliated therewith and has filed all reports and documents required to be
filed with such entities. First Merchants has filed all reports and other
documents required to be filed by it under the Securities Exchange Act of 1934
and the Securities Act of 1933, including First Merchants' Annual Report on Form
10-K for the year ended December 31, 2007, and Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008, copies of which have previously been delivered
to Lincoln. Except as would not reasonably be expected to have a Material
Adverse Effect, all such SEC filings were true, accurate and complete in all
material respects as of the dates of the filings, and no such filings contained
any untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements, at the time and in the light of the
circumstances under which they were made, not false or misleading.
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6.22 Broker's or Finder's Fees. No agent, broker or other person acting on
behalf of First Merchants or under any authority of First Merchants is or shall
be entitled to any commission, broker's or finder's fee or any other form of
compensation or payment from any of the parties hereto, other than attorneys' or
accountants' fees, in connection with any of the transactions contemplated by
this Agreement.
6.23 No Shareholder Approval Required. The approval of the shareholders of
First Merchants is not required for the approval of the Merger, the Bank Merger
or the other transactions contemplated by this Agreement.
6.24 Indemnification Agreements. Except as set forth in the Disclosure
Letter, neither First Merchants nor FMBCI is a party to any indemnification,
indemnity or reimbursement agreement, contract, commitment or understanding to
indemnify any present or former director, officer, employee, shareholder or
agent against any liability or hold the same harmless from liability other than
as expressly provided in the Articles of Incorporation or By-Laws of First
Merchants and FMBCI.
6.25 Bring Down of Representations and Warranties. All representations and
warranties of First Merchants and FMBCI contained in this Section 6 shall be
true, accurate and correct on and as of the Effective Date except for those
representations and warranties which address matters only as of a particular
date (which shall have been true and correct as of such date) or have been
affected by the transactions contemplated by and specified within the terms of
this Agreement.
6.26 Nonsurvival of Representations and Warranties. The representations and
warranties contained in this Section 6 shall expire on the Effective Date or the
earlier termination of this Agreement, and thereafter First Merchants and FMBCI
and all directors and officers of First Merchants and FMBCI shall have no
further liability with respect thereto unless a court of competent jurisdiction
should determine that any misrepresentation or breach of a warranty was
willfully or intentionally made or is deemed to be fraudulent.
SECTION 7
Covenants of Lincoln
Lincoln covenants and agrees with First Merchants and covenants and agrees
to cause the Subsidiaries to act, as follows:
7.01 Shareholder Approval. Lincoln shall submit this Agreement to its
shareholders for approval at a meeting to be called and held in accordance with
applicable law and the Articles of Incorporation and By-Laws of Lincoln at the
earliest possible reasonable date, and the Board of Directors of Lincoln shall
recommend to the shareholders of Lincoln that such shareholders approve this
Agreement and shall not thereafter withdraw or modify its recommendation, except
as otherwise provided in Section 7.05 hereof. The Board of Directors of Lincoln
shall use its commercially reasonable best efforts to obtain any vote of its
shareholders necessary for the approval of this Agreement.
<page>
7.02 Other Approvals. Lincoln and the Bank shall proceed expeditiously,
cooperate fully and use their commercially reasonable best efforts to procure
upon reasonable terms and conditions all consents, authorizations, approvals,
registrations, and certificates, to complete all filings and applications and to
satisfy all other requirements prescribed by law which are necessary for
consummation of the Merger and the Bank Merger on the terms and conditions
provided in this Agreement at the earliest possible reasonable date on or before
December 31, 2008.
7.03 Conduct of Business.
(a) On and after the date of this Agreement and until the Effective
Date or until this Agreement shall be terminated as herein provided,
neither Lincoln nor any Subsidiary shall, without the prior written consent
of First Merchants, (i) make any changes in their capital structure,
including, but not limited to the redemption of common shares;
(ii) authorize an additional class of stock or issue, or authorize the
issuance of, stock; (iii) declare, distribute or pay any dividends on their
common shares, or authorize a stock split, or make any other distribution
to their shareholders, except for the payment by the Bank to Lincoln of
dividends to pay Lincoln's expenses of operations and its business and
payment of fees and expenses incurred in connection with the transactions
contemplated by this Agreement and Lincoln's payment of a $0.14/share
quarterly dividend in accordance with past practice; (iv) merge, combine or
consolidate with or sell their assets or any of their securities to any
other person, corporation or entity, effect a share exchange or enter into
any other transaction not in the ordinary course of business; (v) incur any
liability or obligation, make any commitment, payment or disbursement,
enter into any contract, agreement, understanding or arrangement or engage
in any transaction, or acquire or dispose of any property or asset the fair
market value of which exceeds $100,000, in the aggregate (except for
personal or real property acquired or disposed of in connection with either
foreclosures on mortgages or enforcement of security interests and loans
made or sold by the Bank in the ordinary course of business); (vi) subject
any of their properties or assets to a mortgage, lien, claim, charge,
option, restriction, security interest or encumbrance; (vii) promote or
increase or decrease the rate of compensation (except for promotions and
non-material increases in the ordinary course of business and in accordance
with past practices) or enter into any agreement to promote or increase or
decrease the rate of compensation of any director, officer or employee of
Lincoln or any Subsidiary; (viii) except as set forth in the Disclosure
Letter or as specifically authorized by this Agreement, execute, create,
institute, modify or amend any pension, retirement, savings, stock
purchase, stock bonus, stock ownership, stock option, stock appreciation or
depreciation right or profit sharing plans, any employment, deferred
compensation, consultant, bonus or collective bargaining agreement, group
insurance contract or other incentive, welfare or employee benefit plan or
agreement for current or former directors, officers or employees of Lincoln
or any Subsidiary, change the level of benefits or payments under any of
the foregoing or increase or decrease any severance or termination pay
benefits or any other fringe or employee benefits or pay any bonuses other
than as required by law or regulatory authorities; (ix) amend their
Articles of Incorporation or By-Laws from those in effect on the date of
this Agreement; (x) modify, amend or institute new employment policies or
practices, or enter into, renew or extend any employment or severance
agreements with respect to any present or former directors, officers or
employees of Lincoln or any Subsidiary; (xi) give, dispose, sell, convey,
assign, hypothecate, pledge, encumber or otherwise transfer or grant a
security interest in any capital stock of any Subsidiary; (xii) fail to
make additions to the Bank's reserve for loan losses, or any other reserve
account, in the ordinary course of business and in accordance with sound
banking practices and not inconsistent with generally accepted accounting
principles applied on a consistent basis; (xiii) other than in the ordinary
course of business consistent with past practice, incur any indebtedness
for borrowed money or assume, guarantee, endorse or otherwise as an
accommodation become responsible or liable for the obligations of any other
individual, corporation or other entity; and (xiv) agree in writing or
otherwise to take any of the foregoing actions.
<page>
(b) Lincoln and each Subsidiary shall maintain, or cause to be
maintained, in full force and effect insurance on its properties and
operations and fidelity coverage on its directors, officers and employees
in such amounts and with regard to such liabilities and hazards as
customarily are maintained by other companies operating similar businesses.
(c) Lincoln and each Subsidiary shall continue to give to First
Merchants and its employees, accountants, attorneys and other authorized
representatives reasonable access during regular business hours and other
reasonable times to all their premises, properties, statements, books and
records.
7.04 Preservation of Business. On and after the date of this Agreement and
until the Effective Date or until this Agreement is terminated as herein
provided, Lincoln and the Subsidiaries shall (a) carry on their business
diligently, substantially in the same manner as heretofore conducted, and in the
ordinary course of business; (b) use commercially reasonable efforts to preserve
their business organizations intact, to keep their present officers and
employees and to preserve their present relationship with customers and others
having business dealings with them; and (c) not do or fail to do anything which
will cause a material breach of, or material default in, any contract,
agreement, commitment, obligation, understanding, arrangement, lease or license
to which they are a party or by which they are or may be subject or bound.
7.05 Other Negotiations. Except with the prior written approval of First
Merchants, on and after the date of this Agreement and until the Effective Date
or the earlier termination of this Agreement, Lincoln and the Subsidiaries shall
not, and shall not permit or authorize their respective directors, officers,
employees, agents or representatives to, directly or indirectly, initiate,
solicit, encourage, engage in or continue discussions or negotiations with, or
provide information to, any corporation, association, partnership, person or
other entity or group concerning any merger, consolidation, share exchange,
combination, purchase or sale of substantial assets, sale of shares of capital
stock (or securities convertible or exchangeable into or otherwise evidencing,
or any agreement or instrument evidencing the right to acquire, capital stock),
tender offer, acquisition of control of Lincoln or any Subsidiary or similar
transaction involving Lincoln or any Subsidiary (all such transactions
hereinafter referred to as an "Acquisition Transaction"). Any letters of intent
or other agreements, term sheets, understandings, negotiations or discussions
covering potential Acquisition Transactions currently in effect shall be
terminated and/or discontinued by Lincoln on or prior to execution of this
Agreement. Lincoln and the Subsidiaries shall promptly communicate to First
Merchants the terms of any proposal, written or oral, which Lincoln or any
Subsidiary may receive with respect to an Acquisition Transaction and any
request by or indication of interest on the part of any third party with respect
to initiation of any Acquisition Transaction or discussion with respect thereto.
The above provisions of this Section 7.05 notwithstanding, nothing contained in
this Agreement shall prohibit (a) Lincoln from furnishing information to, or
entering into new discussions or negotiations with, any person or entity that
makes an unsolicited proposal of an Acquisition Transaction if and to the extent
that (i) the Board of Directors of Lincoln, after consultation with legal
counsel, determines in good faith that such action is required for the directors
of Lincoln to fulfill their fiduciary duties and obligations to Lincoln's
shareholders and other constituencies under Indiana law, and (ii) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, Lincoln provides prompt written notice to First
Merchants to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity, or (b) notwithstanding
the provisions of Section 7.01, the Board of Directors of Lincoln from failing
to make, withdrawing or modifying its recommendation to shareholders regarding
the Merger following receipt of a proposal for an Acquisition Transaction if the
Board of Directors of Lincoln, after consultation with and based upon the advice
of legal counsel, determines in good faith that such action is required for the
directors of Lincoln to fulfill their fiduciary duties and obligations to
Lincoln's shareholders and other constituencies under Indiana law.
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7.06 Announcements; Press Releases. In connection with the execution of
this Agreement, Lincoln and First Merchants intend to jointly issue a press
release mutually acceptable to the parties. Except as otherwise required by law,
neither Lincoln nor any Subsidiary shall issue any additional press releases,
conduct interviews, or make any other public announcements or disclosures
relating to the Merger without the prior approval of First Merchants.
7.07 Disclosure Letter. Lincoln shall supplement, amend and update as of
the Effective Date the Disclosure Letter with respect to any matters hereafter
arising which, if in existence or having occurred as of the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Letter. If, at any time prior to the Effective Date, Lincoln becomes
aware of a fact or matter that might indicate that any of the representations
and warranties of Lincoln herein may be untrue, incorrect or misleading in any
material respect, Lincoln shall promptly disclose such fact or matter to First
Merchants in writing.
7.08 Confidentiality. Lincoln and the Subsidiaries shall use commercially
reasonable efforts to cause their respective officers, employees, and authorized
representatives to hold in strict confidence all confidential data and
information obtained by them from First Merchants, unless such information
(a) was already known to Lincoln and the Subsidiaries, (b) becomes available to
Lincoln and the Subsidiaries from other sources, (c) is independently developed
by Lincoln and the Subsidiaries, (d) is disclosed outside of Lincoln and the
Subsidiaries with and in accordance with the terms of prior written approval of
First Merchants, or (e) is or becomes readily ascertainable from public or
published information or trade sources or public disclosure of such information
is required by law or requested by a court or other governmental agency,
commission, or regulatory body. Lincoln and the Subsidiaries further agree that,
in the event this Agreement is terminated, they will return to First Merchants
all information obtained by Lincoln and the Subsidiaries from First Merchants,
including all copies made of such information by Lincoln and the Subsidiaries.
This provision shall survive the Effective Date or the earlier termination of
this Agreement.
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7.09 Cooperation. Lincoln and the Subsidiaries shall generally cooperate
with First Merchants and its officers, employees, attorneys, accountants and
other agents, and, generally, do such other acts and things in good faith as may
be reasonable, necessary or appropriate to timely effectuate the intents and
purposes of this Agreement and the consummation of the transactions contemplated
hereby, including, without limitation, (a) Lincoln shall cooperate and assist
First Merchants in preparation of and/or filing of all regulatory applications,
the "Registration Statement" (as defined below), and all other documentation
required to be prepared for consummation of the Merger and the Bank Merger and
obtaining all necessary approvals, and (b) Lincoln shall furnish First Merchants
with all information concerning itself and each Subsidiary that First Merchants
may reasonably request in connection with the preparation of the documentation
referenced above.
7.10 Letter to Lincoln's Shareholders. Within five (5) business days after
execution of this Agreement by Lincoln and First Merchants, Lincoln shall
deposit in the United States mail a letter to each of the shareholders of record
of Lincoln as of the date of execution of this Agreement informing each
shareholder about the execution of this Agreement and the proposed Merger. The
terms of such letter to the shareholders of Lincoln shall be in a form mutually
agreed to by First Merchants and Lincoln.
7.11 Exercise of Options.
(a) From and after the date hereof, Lincoln covenants that no
additional stock options or stock appreciation rights shall be granted by
Lincoln under any stock option plans of Lincoln or otherwise. Any stock
options granted by Lincoln on or before the date of this Agreement, but
which are currently not vested, may be amended to be immediately vested and
exercisable. On or prior to the Effective Date, all outstanding stock
options of Lincoln, disclosed pursuant to Section 5.03(e), may be exercised
in accordance with the stock option plan under which such option was
granted, and Lincoln shall use reasonable efforts to cause such stock
options to be exercised on or immediately before the Effective Date.
(b) On or prior to the calendar day immediately preceding the
Effective Date, or such other date mutually agreed to by Lincoln and First
Merchants (the "Option Deadline"), Lincoln shall take all action necessary
to terminate all stock option plans of Lincoln outstanding as of the Option
Deadline and shall use reasonable efforts to obtain necessary consents from
optionees to permit such termination in accordance with the foregoing
provisions. No Lincoln stock options shall continue to be outstanding after
the Option Deadline. Instead, as of the Option Deadline, any outstanding
Lincoln stock options that have not been previously exercised are to be
terminated in return for either (i) or (ii):
(i) A Cash amount determined using the following equation:
[(FMAP x CR) - EP] x OP
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(For purposes of this equation, FMAP equals the First Merchants Average Price;
CR equals the Conversion Ratio; EP equals the applicable exercise price per
Lincoln common share issuable upon exercise of the applicable stock option; and
OP equals the number of Lincoln common shares issuable upon exercise of such
stock option.)
(ii) The number of Lincoln common shares issuable upon exercise
of such Lincoln stock option in exchange for payment of the exercise
price as required in the applicable stock option. For purposes of this
item (ii), the required payment can also be made by cashless exercise,
which also includes an equity swap, all as permitted in the applicable
election form. In the event that the optionee fails to pay this
exercise price in cash or through such cashless exercise on or before
the Option Deadline, the optionee shall be deemed to have elected to
receive the cash amount as referred to in the immediately preceding
item (i).
(c) An election to receive cash or common stock under Section 7.11(b)
must be made no later than two (2) days prior to the Option Deadline. If an
election is not made by such time, a non-electing optionee shall be deemed
to have elected to receive cash under item (i) of Section 7.11(b). In
addition, if the cash amount calculated under item (i) of Section 7.11(b)
is negative, a non-electing optionee shall be entitled to nothing upon
termination of the previously unexercised Lincoln stock option.
(d) In addition to those common shares issued upon exercise of stock
options as provided in this section 7.11 (the "Option Shares"), Lincoln
shall have no more than 5,319,731 common shares outstanding immediately
prior to the Effective Date. Furthermore, the diversity of payment
limitations contained in section 3.07 shall otherwise apply to the Option
Shares, as well as all other Lincoln common shares outstanding as of the
Effective Date.
7.12 SEC and Other Reports.
(a) Promptly upon its becoming available, Lincoln shall furnish to
First Merchants one (1) copy of each financial statement, report, notice,
or proxy statement sent by Lincoln to its shareholders generally and of
each regular or periodic report, registration statement or prospectus filed
by Lincoln with NASDAQ or the SEC or any successor agency, of any order
issued by any Governmental Authority in any proceeding to which Lincoln is
a party, and of any notice or communication received by Lincoln from NASDAQ
or the SEC. For purposes of this provision, "Governmental Authority" shall
mean any government (or any political subdivision or jurisdiction thereof),
court, bureau, agency or other governmental entity having or asserting
jurisdiction over Lincoln or any of its respective businesses, operations
or properties.
(b) None of the information supplied or to be supplied by Lincoln for
inclusion or incorporation by reference in (i) the Registration Statement
(as defined in Section 8.01 hereof) will, at the time the Registration
Statement and each amendment or supplement thereto, if any, becomes
effective under the Securities Act of 1933, as amended, contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements contained therein, in light of the circumstances in
which they are made, not misleading, and (ii) the Proxy Statement (as
defined in Section 8.01 hereof) and any amendment or supplement thereto
will, at the date of mailing, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they are made,
not misleading.
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7.14 Adverse Actions. Lincoln shall not (a) take any action while
knowing that such action would, or is reasonably likely to, prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code; or (b) knowingly take any action that is intended
or is reasonably likely to result in (i) any of its representations and
warranties set forth in this Agreement being or becoming untrue in any
material respect at any time at or prior to the Effective Date, (ii) any of
the conditions to the Merger set forth in Section 9 not being satisfied,
(iii) a material violation of any provision of this Agreement, or (iv) a
material delay in the consummation of the Merger except, in each case, as
may be required by applicable law or regulation.
7.15 Bank Merger Agreement. Lincoln shall cause the appropriate
officers of the Bank to execute and deliver the Bank Merger Agreement
contemporaneously herewith.
7.16 Employee Stock Ownership Plan. Lincoln shall establish a freeze
and termination date for the ESOP that is no later than the day before the
Effective Date. As of the Effective Date, the ESOP shall be frozen and all
shares of Lincoln stock held by the ESOP shall be converted into rights to
receive the Merger Consideration described in Section 3 in respect thereof.
On or before the ESOP's receipt of a favorable determination letter from
the Internal Revenue Service ("IRS") with regard to termination, all
outstanding indebtedness of the ESOP shall be repaid, any assets remaining
in the suspense fund under the ESOP shall be allocated among the accounts
of the ESOP Participants as additional earnings as otherwise provided in
the ESOP and, after receipt of the such determination letter, the net
assets of the ESOP shall be promptly distributed to Participants under the
ESOP and their Beneficiaries, except as otherwise required by applicable
law. Within five (5) business days following the approval of the Merger by
the Lincoln shareholders, Lincoln shall file the notifications or
applications with the IRS necessary to comply with the provisions of this
Section 7.16. To the extent any notifications or applications with the IRS
to comply with the provisions of this Section 7.16 are required to be filed
after the Effective Date, First Merchants shall promptly make such
notifications or applications. If for any reason the IRS does not permit
the ESOP to be terminated or distributions to be made to employees of
Lincoln and its Subsidiaries as provided above, First Merchants will, in
its sole discretion, either (a) merge the ESOP into its existing 401(k)
Plan or (b) amend the ESOP to provide for the ESOP to be continued after
the Effective Date for the sole and exclusive benefit of the individuals
participating therein or having accounts thereunder immediately prior to
the Effective Date; provided, however, that (i) no such amendment shall
require or have the effect of requiring First Merchants, Lincoln or their
respective Subsidiaries to make any contributions to the ESOP at or after
the Effective Date, (ii) no such amendment shall require or have the effect
of requiring First Merchants, Lincoln or their respective Subsidiaries to
make any contributions to the ESOP at or prior to the Effective Date in
addition to any contributions that otherwise would be required, (iii) any
such amendment shall be conditioned upon its not having an adverse effect
upon the qualified status of the ESOP under Section 401(a) of the Code, and
(iv) no such amendment shall require or have the effect of requiring
continuation of the ESOP for more than three years after the Effective
Date. Lincoln and its Subsidiaries shall make no contributions to the ESOP
between the date hereof and the Effective Date other than elective
deferrals (Compensation Reduction Amounts), matching contributions (Company
Matched Contributions), but only at rates as currently provided in the
ESOP, and such other contributions as may be required to maintain the
tax-qualified status of the ESOP or to enable the ESOP to make required
payments on the loans currently outstanding to it.
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7.17 Lincoln Recognition and Retention Plan.
(a) As of the date hereof, 32,888 of the outstanding Lincoln Common
Shares are held in trust in the Lincoln Federal Savings Bank Recognition
and Retention Plan and Trust (the "RRP Plan"). On and after the date of
this Agreement, no further contributions shall be made to the RRP Plan.
However, on or before the Effective Date, but otherwise subject to any
applicable statutory or regulatory requirements, Lincoln will: (a) modify
any or all outstanding RRP Plan Awards held by employees or directors of
Lincoln or its Subsidiaries to become fully vested on or before the
Effective Date, (b) issue fully vested and previously unissued RRP Plan
Awards to employees or directors of Lincoln and its Subsidiaries in
accordance with the terms and conditions of the RRP Plan, and (c) make
distributions of Lincoln Common Shares to applicable recipients as provided
in the RRP Plan.
(b) If for any reason, the RRP Plan has not been terminated by the
Effective Date, First Merchants agrees to promptly complete RRP Plan
distributions as soon as reasonably possible after the Effective Date to
the designated participants and beneficiaries of the RRP Plan; however, it
is acknowledged that these final distributions will be in cash or First
Merchants common stock as provided in Section 3.
(c) As soon as all Lincoln Common Shares and Merger Consideration, if
any, held in the RRP Plan have been distributed to the officers and
directors participating in the RRP Plan, it shall terminate.
SECTION 8
Covenants of First Merchants
First Merchants covenants and agrees with Lincoln and covenants and
agrees to cause its Subsidiaries to act as follows:
8.01 Approvals. First Merchants and FMBCI shall proceed expeditiously,
cooperate fully and use its best efforts to procure upon reasonable terms and
conditions all consents, authorizations, approvals, registrations and
certificates, to complete all filings and applications and to satisfy all other
requirements prescribed by law which are necessary for consummation of the
Merger on the terms and conditions provided in this Agreement at the earliest
possible reasonable date. First Merchants agrees to use its best efforts to
raise any additional capital which might be required to obtain any required
regulatory approvals of the Merger. First Merchants shall provide Lincoln with
copies of proposed regulatory filings in connection with the Merger and afford
Lincoln the opportunity to offer comment on the filings before filing. Not in
limitation of the foregoing, First Merchants agrees to prepare a registration
statement on Form S-4 (the "Registration Statement"), to be filed by First
Merchants with the SEC in connection with the issuance of First Merchants common
stock in the Merger (including the proxy statements and prospectus and other
proxy solicitation materials of Lincoln constituting a part thereof (the "Proxy
Statement") and all related documents). First Merchants agrees to advise
Lincoln, promptly after First Merchants receives notice thereof, of the time
when the Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order or the suspension of
the qualification of First Merchants common stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information. First Merchants agrees to
use its reasonable best efforts to list, prior to the Effective Date, on the
Global Select Market System of NASDAQ (subject to official notice of issuance),
the shares of First Merchants common stock to be issued to the holders of
Lincoln common shares in the Merger. The approval of the shareholders of First
Merchants is not required for the approval of the Merger, the Bank Merger or the
other transactions contemplated by this Agreement.
<page>
8.02 Preservation of Business. On and after the date of this Agreement and
until the Effective Date or until this Agreement is terminated as herein
provided, First Merchants and the Subsidiaries shall (a) carry on their business
diligently, substantially in the same manner as heretofore conducted, and in the
ordinary course of business; (b) use commercially reasonable efforts to preserve
their business organizations intact, to keep their present officers and
employees and to preserve their present relationship with customers and others
having business dealings with them; and (c) not do or fail to do anything which
will cause a material breach of, or material default in, any contract,
agreement, commitment, obligation, understanding, arrangement, lease or license
to which they are a party or by which they are or may be subject or bound.
8.03 Certain Employee and Officer Matters.
(a) As of the Effective Date, First Merchants will cover the
Subsidiaries' employees under a tax-qualified retirement plan First
Merchants maintains for its employees, provided that such an employee meets
the applicable participation requirements, in lieu of the Subsidiaries'
current tax-qualified retirement plan. Following the Effective Date, the
Subsidiaries' employees will otherwise receive employee benefits that in
the aggregate are substantially similar to the employee benefits provided
to other employees of First Merchants and its subsidiaries on the Effective
Date. For purposes of determining a Lincoln or Subsidiaries' employee's
service under a First Merchants' Employee Benefit Plan that the employee is
permitted to enter, service with Lincoln or the Subsidiaries will be
treated as service with First Merchants for all purposes except that
service with Lincoln or the Subsidiaries shall not be treated as service
with First Merchants for purposes of benefit accrual of any defined benefit
plan or the Service-Weighted Contributions under the First Merchants 401(k)
Plan. First Merchants, in its sole discretion, shall determine whether
Lincoln's and the Subsidiaries' tax-qualified retirement plan(s) are
terminated or merged into First Merchants' plan(s).
(b) Coverage Under First Merchants' Health Plan. With respect to First
Merchant's health plans under which employees of the Subsidiaries become
participants under the provisions of Section 8.03(a) above, First Merchants
agrees to waive all restrictions and limitations for pre-existing
conditions and First Merchants will use its best efforts to cause any
insurer providing a benefit to do the same. Employees of Lincoln or its
subsidiaries who are hired by First Merchants or its subsidiaries shall not
be subject to a waiting period for coverage under First Merchants' Health
Plan.
<page>
(c) COBRA. First Merchants shall be responsible for providing COBRA
continuation coverage to any qualified employee or former employee of
Lincoln or the Subsidiaries and to their respective qualified
beneficiaries, on and after the Effective Date, regardless of when the
qualifying event occurred.
(d) Change of Control/Employment Agreements. First Merchants agrees to
accept and honor any obligations of Lincoln or the Bank with the eleven
(11) officers pursuant to their employment and change of control agreements
previously disclosed to First Merchants and identified in the Disclosure
Letter. First Merchants and Lincoln agree the Merger is a "change in
control" for purposes of such agreements, and First Merchants agrees to
make, within thirty (30) days after the Effective Date, lump sum payments
for such "change in control" even though any such officer has not
terminated employment as provided in those agreements. Except for Mr. Engle
and Mr. Ditmars, the payments shall be in exchange for the respective
employee's agreement to terminate his or her employment and/or change of
control agreements as of the Effective Date without further liability of
the Bank, Lincoln, First Merchants and/or FMBCI.
(e) Restricted Stock Grants and Options. Subsequent to the Effective
Date, in exchange for their continued service to First Merchants and FMBCI,
First Merchants and/or FMBCI will grant to certain senior management of
Lincoln and/or the Bank restricted stock and/or stock options as follows:
(i) 6,400 restricted shares or 24,000 stock options or a
combination of both to Jerry R. Engle;
(ii) 6,400 restricted shares or 24,000 stock options or a
combination of both to John B. Ditmars; and
(iii) 19,200 restricted shares or 72,000 stock options or a
combination of both in the aggregate to the remainder of the senior
management of Lincoln and/or the Bank as allocated by First Merchants,
after consultation with Mr. Engle and Mr. Ditmars.
8.04 Press Release. In connection with the execution of this Agreement,
Lincoln and First Merchants intend to jointly issue a press release mutually
acceptable to the parties. Except as otherwise required by law, neither First
Merchants nor FMBCI shall issue any additional press releases or make any other
public announcements or disclosures relating to the Merger or the Bank Merger
without the prior approval of Lincoln.
<page>
8.05 Confidentiality. First Merchants and FMBIC shall, and shall use its
best efforts to cause its Subsidiaries, officers, employees, and authorized
representatives to, hold in strict confidence all confidential data and
information obtained by them from Lincoln, unless such information (i) was
already known to First Merchants and Subsidiaries, (ii) becomes available to
First Merchants and Subsidiaries from other sources, (iii) is independently
developed by First Merchants and Subsidiaries, (iv) is disclosed outside of
First Merchants and Subsidiaries with and in accordance with the terms of prior
written approval of Lincoln, or (v) is or becomes readily ascertainable from
public or published information or trade sources or public disclosure of such
information is required by law or requested by a court or other governmental
agency, commission, or regulatory body. First Merchants and Subsidiaries further
agree that in the event this Agreement is terminated, it will return to Lincoln
all information obtained by it regarding Lincoln or any Subsidiary, including
all copies made of such information by First Merchants and Subsidiaries. This
provision shall survive the Effective Date or the earlier termination of this
Agreement.
8.06 Board of FMBCI. Upon consummation of the Bank Merger, FMBCI shall be a
national bank organized under the laws of the United States and the officers and
directors of the Bank in office immediately prior to the consummation of the
Merger shall be the officers and directors of the Bank at the Effective Date.
Notwithstanding the foregoing, First Merchants and FMBCI shall take all action
necessary to nominate and approve such Directors of the Bank who desire to
continue to serve on the Board of Directors of FMBCI for at least the remainder
of the terms to which they have been elected. FMBCI directors will be subject to
First Merchants' policy of mandatory retirement at age seventy (70); provided,
however, the policy of mandatory retirement will not apply to any of the Bank's
current directors until twenty-four (24) months after the Effective Date.
8.07 Board of First Merchants. First Merchants shall cause all necessary
action to be taken to cause Jerry R. Engle and another current Director of
Lincoln chosen by First Merchants, to either (i) be nominated for election as
members of the First Merchants' Board of Directors for a three (3) year term at
the first annual meeting of the shareholders of First Merchants following the
Effective Date; or (ii) to be appointed as members of the First Merchants' Board
of Directors at the next meeting of the First Merchants' Board of Directors
following the Effective Date to serve until the first annual meeting of the
shareholders of First Merchants following the Effective Date and then to be
nominated for election as members of the First Merchants' Board of Directors for
a three (3) year term at the first annual meeting of the shareholders of First
Merchants following the Effective Date, whichever can be effected first
depending on the timing of the occurrence of the Effective Date. The two (2)
individuals from the Board of Directors of Lincoln elected to the Board of
Directors of First Merchants shall be subject to First Merchants' policy of
mandatory retirement at age seventy (70); provided, however, the policy of
mandatory retirement will not apply to such individuals until twenty-four (24)
months after the Effective Date.
8.08 Directors and Officers Insurance.
(a) For a period of at least three years from the Effective Date,
First Merchants shall use its reasonable best efforts to obtain an
endorsement to its director's and officer's liability insurance policy to
cover the present and former officers and directors of Lincoln and the Bank
(determined as of the Effective Date) with respect to claims against such
directors and officers arising from facts or events which occurred before
the Effective Date, which insurance shall contain at least the same
coverage and amounts, and contain terms and conditions no less
advantageous, as that coverage currently provided by Lincoln; provided
however, that if First Merchants is unable to obtain such endorsement, then
Lincoln may purchase tail coverage under its existing director and officer
liability insurance policy for such claims; provided further that in no
event shall First Merchants be required to expend in the aggregate during
each year in such three-year period more than two times the current annual
amount spent by Lincoln (the "Insurance Amount") to maintain or procure its
current directors' and officers' insurance coverage; provided further, that
if First Merchants is unable to maintain or obtain the insurance called for
by this Section 8.07, First Merchants shall use its reasonable best efforts
to obtain as much comparable insurance as is available for the Insurance
Amount; provided, further, that officers and directors of Lincoln or the
Bank may be required to make application and provide customary
representations and warranties to First Merchants' insurance carrier for
the purpose of obtaining such insurance.
<page>
(b) For six years after the Effective Date, the Continuing Company
shall indemnify, defend and hold harmless the present and former officers
and directors of Lincoln and the Bank against all losses, expenses
(including attorneys' fees), claims, damages or liabilities arising out of
actions or omissions occurring on or prior to the Effective Date
(including, without limitation, the transactions contemplated by this
Agreement) to the full extent then permitted under the Indiana Business
Corporation Law and by First Merchants' or Lincoln's Articles of
Incorporation as in effect on the date hereof (whichever is more favorable
to the officers and directors of Lincoln and the Bank), including
provisions relating to advances of expenses incurred in the defense of any
action or suit.
(c) Following the Effective Date, First Merchants will provide any
Lincoln or Bank officers, directors and employees who become officers,
directors and employees of the Continuing Company or its subsidiaries with
the same directors and officers liability insurance coverage and
indemnification protections that First Merchants provides to other
officers, directors and employees of First Merchants or its subsidiaries.
(d) If First Merchants shall consolidate with or merge into any other
entity and shall not be the continuing or surviving entity of such
consolidation or merger or shall transfer all or substantially all of its
assets to any entity, then and in each case, proper provision shall be made
so that the successors and assigns of First Merchants shall assume the
obligations set forth in this Section 8.07.
8.09 SEC and Other Reports.
(a) Promptly upon its becoming available, First Merchants shall
furnish to Lincoln one (1) copy of each financial statement, report,
notice, or proxy statement sent by First Merchants to its shareholders
generally and of each regular or periodic report, registration statement or
prospectus filed by First Merchants with the SEC or any successor agency,
of any order issued by any Governmental Authority in any proceeding to
which First Merchants is a party, and of any notice or communication
received by First Merchants from the SEC. For purposes of this provision,
"Governmental Authority" shall mean any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other
governmental entity having or asserting jurisdiction over First Merchants
or any of its respective businesses, operations or properties.
<page>
(b) None of the information supplied or to be supplied by First
Merchants for inclusion or incorporation by reference in (i) the
Registration Statement (as defined in Section 8.01 hereof) will, at the
time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, as amended,
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained therein, in light of the
circumstances in which they are made, not misleading, and (ii) the Proxy
Statement (as defined in Section 8.01 hereof) and any amendment or
supplement thereto will, at the date of mailing, contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements contained therein, in light of the circumstances in
which they are made, not misleading.
8.10 Disclosure Letter. First Merchants shall supplement, amend and update
as of the Effective Date the Disclosure Letter with respect to any matters
hereafter arising which, if in existence or having occurred as of the date of
this Agreement, would have been required to be set forth or described in the
Disclosure Letter. If, at any time prior to the Effective Date, First Merchants
becomes aware of a fact or matter that might indicate that any of the
representations and warranties of First Merchants herein may be untrue,
incorrect or misleading in any material respect, First Merchants shall promptly
disclose such fact or matter to First Merchants in writing.
8.11 Adverse Actions. First Merchants shall not (a) take any action while
knowing that such action would, or is reasonably likely to, prevent or impede
the Merger from qualifying as a reorganization within the meaning of Section 368
of the Code; or (b) knowingly take any action that is intended or is reasonably
likely to result in (i) any of its representations and warranties set forth in
this Agreement being or becoming untrue in any respect at any time at or prior
to the Effective Date, (ii) any of the conditions to the Merger set forth in
Section 9 not being satisfied, (iii) a material violation of any provision of
this Agreement, or (iv) a material delay in the consummation of the Merger
except, in each case, as may be required by applicable law or regulation.
8.12 Cooperation. First Merchants shall generally cooperate with Lincoln
and its officers, employees, attorneys, accountants and other agents, and,
generally, do such other acts and things in good faith as may be reasonable,
necessary or appropriate to timely effectuate the intents and purposes of this
Agreement and the consummation of the transactions contemplated hereby. First
Merchants shall furnish Lincoln with all information concerning itself and each
of its direct and indirect subsidiaries that Lincoln may reasonably request.
<page>
8.13 Bank Merger Agreement. First Merchants shall cause the appropriate
officers of FMBCI to execute and deliver the Bank Merger Agreement upon approval
by FMBCI's Board of Directors.
SECTION 9
Conditions Precedent To The Merger and the Bank Merger
The obligation of each of the parties hereto to consummate the transactions
contemplated by this Agreement is subject to the satisfaction and fulfillment of
each of the following conditions on or prior to the Effective Date:
9.01 Lincoln Shareholder Approval. The shareholders of Lincoln shall have
approved the Merger and confirmed this Agreement as required by applicable law.
9.02 Registration Statement Effective. First Merchants shall have
registered its shares of common stock to be issued to shareholders of Lincoln in
accordance with this Agreement with the SEC pursuant to the 1933 Act, and all
state securities and "blue sky" approvals and authorizations required to offer
and sell such shares shall have been received by First Merchants. The
registration statement with respect thereto shall have been declared effective
by the SEC and no stop order shall have been issued or threatened. The shares of
First Merchants common stock shall have been listed for trading on the NASDAQ
Global Select Market System (subject to official notice of issuance).
9.03. Tax Opinions.
(a) Lincoln shall have obtained an opinion of Bose McKinney & Evans,
LLP dated on or about the Effective Date to the effect that the Merger
effected pursuant to this Agreement shall constitute a reorganization
within the meaning of Section 368(a) of the Code, and that no gain or loss
will be recognized by shareholders of Lincoln to the extent they receive
shares of First Merchants common stock in the Merger in exchange for their
Lincoln common shares, other than the gain or loss to be recognized as to
cash received in lieu of fractional share interests and cash received in
exchange for Lincoln common shares. Such opinions shall be based upon
factual representations received by counsel from Lincoln and First
Merchants, which representations may take the form of written
certifications.
(b) First Merchants shall have obtained an opinion of Bingham McHale
LLP dated on or about the Effective Date to the effect that the Merger
effected pursuant to this Agreement shall constitute a reorganization
within the meaning of Section 368(a) of the Code. Such opinions shall be
based upon factual representations received by counsel from Lincoln and
First Merchants, which representations may take the form of written
certifications.
9.04 Regulatory Approvals. The Federal Reserve Board and the Indiana
Department of Financial Institutions shall have authorized and approved the
Merger and the transactions related thereto. In addition, all appropriate
orders, consents, approvals and clearances from all other regulatory
agencies and governmental authorities whose orders, consents, approvals or
clearances are required by law for consummation of the Merger shall have
been obtained.
<page>
9.05 Officer's Certificate. First Merchants and Lincoln shall have
delivered to each other a certificate signed by their respective Chairman
or President and their Secretary, dated the Effective Date, certifying that
(a) all the representations and warranties of their respective corporations
are true, accurate and correct on and as of the Effective Date except for
those representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date) or
have been affected by the transactions contemplated by and specified within
the terms of this Agreement; (b) all the covenants of their respective
corporations have been complied with in all material respects from the date
of this Agreement through and as of the Effective Date; and (c) their
respective corporations have satisfied and fully complied with all
conditions necessary to make this Agreement effective as to them.
9.06 Fairness Opinion. Lincoln shall have obtained an opinion from
Sandler O'Neill Partners, L.P., to the effect that the consideration paid
in the Merger is fair to the shareholders of Lincoln from a financial
viewpoint. Such opinion shall be (a) in form and substance reasonably
satisfactory to Lincoln, (b) dated as of a date not later than the mailing
date of the Proxy Statement relating to the Merger and (c) included in the
Proxy Statement.
9.07 No Judicial Prohibition. Neither Lincoln, any Subsidiary nor
First Merchants or FMBCI shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger.
9.08 Other Consents and Approvals. All consents and other approvals
required for the transfer of any contracts, agreements, leases, loans, etc.
as a result of the Merger shall have been obtained, except where the
failure to obtain such consents or approvals would not have a Material
Adverse Effect.
9.09 Options. Except as otherwise provided in section 7.11: (a) all of
the options disclosed in Section 5.03(e) of the Disclosure Letter shall
have been exercised and/or terminated, (b) in addition to the Option
Shares, Lincoln shall have no more than 5,319,731 shares of common stock
issued and outstanding, (c) Lincoln shall have no commitment to issue any
additional shares of common stock, and (d) all stock option plans of
Lincoln shall have been terminated.
9.10 Executive Employment Agreements. FMBCI shall enter into Executive
Employment Agreements with Jerry R. Engle and John B. Ditmars in
substantially the forms attached hereto as Exhibit B-1 and B-2,
respectively, immediately prior to the Effective Date that will supersede
their current employment agreements with Lincoln and/or the Bank, except
for the obligation to make the lump sum payments described in Section
8.03(d) above.
9.11 Opinions. The parties shall have received the respective opinions
of counsel described in Section 12.04 of this Agreement.
9.12 Bank Merger Agreement. FMBCI and the Bank shall have entered into
the Bank Merger Agreement.
<page>
SECTION 10
Termination of Merger
10.01 Manner of Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Effective Date by
written notice delivered by First Merchants to Lincoln or by Lincoln to First
Merchants only for the following reasons:
(a) By the mutual consent of First Merchants and Lincoln, if the Board
of Directors of each so determines by vote of a majority of the members of
its entire Board;
(b) By First Merchants or Lincoln, if its respective Board of
Directors so determines by vote of a majority of the members of its entire
Board, in the event of either: (i) a material breach by the other party of
any representation or warranty contained herein which breach cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching party of such breach; (ii) a material breach by the other party
of any of the covenants or agreements contained herein, which breach cannot
be or has not been cured within 30 days after the giving of written notice
to the breaching party of such breach; or (iii) any event, fact or
circumstance shall have occurred that has had or could reasonably be
expected to have a Material Adverse Effect on the other party;
(c) By Lincoln or First Merchants, if it shall determine in its sole
discretion that the transactions contemplated by this Agreement have become
inadvisable or impracticable by reason of commencement of material
litigation or proceedings against any of the parties;
(d) By First Merchants, if the Merger has not been consummated before
January 1, 2009 (provided that First Merchants is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein);
(e) By First Merchants or Lincoln, pursuant to their respective
termination rights set forth in Section 3.04 hereof;
(f) By Lincoln, if the appropriate discharge of the fiduciary duties
of the Board of Directors of Lincoln consistent with Section 7.05 requires
that Lincoln terminate this Agreement;
(g) By First Merchants, if Lincoln's Board of Directors fails to make,
withdraws or modifies its recommendation to Lincoln's shareholders to vote
in favor of the Merger following receipt of a written proposal for an
Acquisition Transaction;
(h) By First Merchants, if Lincoln fails to give any written notice as
required by Section 7.05 or if within twenty (20) days after giving First
Merchants written notice pursuant to Section 7.05 of its intent to furnish
information to or enter into discussions or negotiations with another
person or entity, Lincoln does not terminate all discussions, negotiations
and information exchanges related to such Acquisition Transaction and
provide First Merchants with written notice of such termination;
<page>
(i) By either party (provided that the terminating party is not then
in material breach of any representation or warranty contained in this
Agreement or in material breach of any covenant or other agreement
contained in this Agreement) in the event that any of the conditions
precedent to the obligations of such party to consummate the Merger cannot
be satisfied or fulfilled by the date specified in Section 10.01(k) of this
Agreement;
(j) By Lincoln, if First Merchants enters into a definitive agreement
in which it is the target company or the company to be acquired which would
result in a change of control of First Merchants or require approval
pursuant to the Bank Holding Company Act of 1956, as amended; or
(k) By Lincoln or First Merchants, if the Merger has not been
consummated before June 30, 2009 (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein).
10.02 Effect of Termination. Except as provided below, in the event that
this Agreement is terminated pursuant to the provisions of Section 10.01 hereof,
no party shall have any liability to any other party for costs, expenses,
damages or otherwise; provided, however, that notwithstanding the foregoing, in
the event that this Agreement is terminated pursuant to Section 10.01(b) hereof
on account of a willful breach of any of the representations and warranties set
forth herein or any willful breach of any of the agreements set forth herein,
then the non-breaching party shall be entitled to recover appropriate damages
from the breaching party, including, without limitation, reimbursement to the
non-breaching party of its costs, fees and expenses (including attorneys',
accountants' and advisors' fees and expenses) incident to the negotiation,
preparation and execution of this Agreement and related documentation; provided,
however, that nothing in the foregoing proviso shall be deemed to constitute
liquidated damages for the breach by a party of the terms of this Agreement or
otherwise limit the rights of the non-breaching party. Notwithstanding the
foregoing, (i) in the event of termination by Lincoln in accordance with Section
10.01(f) or by First Merchants in accordance with Section 10.01(g) or 10.01(h),
Lincoln shall pay First Merchants the sum of $3,200,000 as liquidated damages,
(ii) in the event of termination by Lincoln in accordance with Section 10.01(j),
First Merchants shall pay Lincoln the sum of $3,200,000, and (iii) in the event
of termination by First Merchants in accordance with Section 10.01(d), First
Merchants shall pay Lincoln the sum of $2,000,000. Such liquidated damages shall
be in lieu of costs, expenses and damages otherwise recoverable under the first
sentence of this Section 10.02. Such payment shall be made within ten (10) days
of the date of notice of termination. Each of First Merchants and Lincoln
acknowledges the reasonableness of such amount in light of the considerable time
and expense invested and to be invested by each of them and their respective
representatives in furtherance of the Merger. Such amount was agreed upon by
First Merchants and Lincoln as compensation for their time and expense and not
as a penalty, it being impossible to ascertain the exact value of the time and
expense to be invested. The prevailing party in the event of any litigation to
enforce this Section 10.02 shall be entitled to recover reasonable attorneys'
fees.
<page>
SECTION 11
Effective Date Of Merger
Subject to the terms and upon satisfaction of all requirements of law and
the conditions specified in this Agreement, the Merger shall become effective at
the close of business on the day specified in the Articles of Merger of Lincoln
with and into First Merchants (the "Articles of Merger") as filed with the
Secretary of State of the State of Indiana (the "Effective Date"). Unless
otherwise agreed to by the parties, the Effective Date shall be no later than
the last business day of the month in which both (a) any waiting period
following the last approval of the Merger by a state or federal regulatory
agency or governmental authority expires and (b) the conditions precedent to the
Merger outlined in Section 9 have been satisfied; provided, however the
Effective Date shall not be before December 31, 2008, unless otherwise agreed by
the parties.
SECTION 12
Closing
12.01 Closing Date and Place. The closing of the Merger (the "Closing") and
the Bank Merger shall take place at the main office of First Merchants on the
Effective Date or at such other time and place as mutually agreed to by First
Merchants and Lincoln.
12.02 Merger-Articles of Merger. Subject to the provisions of this
Agreement, on the Effective Date, the Articles of Merger shall be duly filed
with the Secretary of State of the State of Indiana.
12.03 Bank Merger-Articles of Merger. Subject to the provisions of this
Agreement, on the Effective Date, the articles of merger or other filings
necessary to consummate the Bank Merger shall be duly filed.
12.04 Opinions of Counsel. At the Closing, (a) Lincoln shall deliver an
opinion of its counsel, Bose McKinney & Evans LLP, to First Merchants, and
(b) First Merchants shall deliver an opinion of its counsel, Bingham McHale LLP
to Lincoln, each dated as of the date of Closing. The form of such opinion shall
be as mutually agreed to by the parties hereto and their respective counsel;
provided, however, the opinion of Lincoln's counsel shall also include an
opinion that the ESOP termination and distribution contemplated under Section
7.16 hereof was conducted in accordance with all applicable plan documents,
statutes, rules and regulations.
SECTION 13
Miscellaneous
13.01 Effective Agreement. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns, but none of the provisions thereof shall inure to the benefit
of any other person, firm, or corporation whomsoever other than Sections 7.11,
7.16, 7.17, 8.03, 8.06, 8.07 and 8.08, which may be enforced by the employees
and officers of Lincoln and Lincoln's Subsidiaries. Neither this Agreement nor
any of the rights, interests, or obligations hereunder shall be assigned or
transferred by either party hereto without the prior written consent of the
other party.
<page>
13.02 Waiver; Amendment.
(a) First Merchants and Lincoln may, each individually, by an
instrument in writing executed in the same manner as this Agreement:
(i) extend the time for the performance of any of the covenants or
agreements of the other party under this Agreement; (ii) waive any
inaccuracies in the representations or warranties of the other party
contained in this Agreement or in any document delivered pursuant hereto or
thereto; (iii) waive the performance by the other party of any of the
covenants or agreements to be performed by it or them under this Agreement;
or (iv) waive the satisfaction or fulfillment of any condition the
nonsatisfaction or nonfulfillment of which is a condition to the right of
the party so waiving to terminate this Agreement. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any other or subsequent breach hereunder.
(b) Notwithstanding the prior approval by the shareholders of Lincoln,
this Agreement may be amended, modified or supplemented by the written
agreement of Lincoln, First Merchants, the Bank and FMBCI without further
approval of such shareholders, except that no such amendment, modification
or supplement shall decrease the consideration specified in Section 3
hereof, or shall otherwise materially adversely affect the rights of the
shareholders of Lincoln without the further approval of such shareholders.
13.03 Notices. Any and all notices or other communications required or
permitted under this Agreement shall be in writing and shall be deemed to be
given (i) when delivered in person, or (ii) on the day of transmission if sent
via facsimile transmission to the facsimile number given below, provided
telephonic confirmation of receipt is obtained promptly after completion of
transmission, or (iii) on the fifth (5th) day after sent by certified or
registered mail, postage prepaid, return receipt requested, addressed as
follows:
If to First Merchants: With a copy to (which will not
constitute notice):
200 E. Jackson Street Bingham McHale LLP
Muncie, IN 47305 2700 Market Tower
Attn: Michael C. Rechin, 10 West Market Street
President and Indianapolis, Indiana 46204-2982
Chief Executive Officer Attn: David R. Prechtel, Esq.
(765) 741-7283 (317) 236-9907
If to Lincoln: With a copy to (which will not
constitute notice):
905 Southfield Drive Bose McKinney & Evans LLP
Plainfield, Indiana 46168 111 Monument Circle
Attn: Jerry R. Engle Suite 2700
Chairman of the Board, Indianapolis, Indiana 46204
President and Chief Attn: David A. Butcher
Executive Officer (317) 684-5123
(317) 837-6903
<page>
or to such substituted address as any of them have given to the other in
writing. Notwithstanding the foregoing, all notices required to be given
pursuant to Sections 3.04(b) and 3.04(c) hereof shall be given in the time
periods specified in such sections by either hand delivery or facsimile
transmission to the specified parties.
13.04 Headings. The headings in this Agreement have been inserted solely
for the ease of reference and should not be considered in the interpretation or
construction of this Agreement.
13.05 Severability. In case any one or more of the provisions contained
herein shall, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision or provisions
had never been contained herein.
13.06 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument. In addition, this Agreement and
the documents to be delivered hereunder may be executed by the parties hereto
either manually or by facsimile signatures, each of which shall constitute an
original signature.
13.07 Governing Law. This Agreement is executed in and shall be construed
in accordance with the laws of the State of Indiana, without regard to choice of
law principles.
13.08 Entire Agreement. This Agreement supersedes any other agreement,
whether oral or written, between First Merchants and Lincoln relating to the
matters contemplated hereby, and constitutes the entire agreement between the
parties hereto.
13.09 Expenses. First Merchants and Lincoln shall each pay their own
expenses incidental to the transactions contemplated hereby. It is understood
that the fees of Sandler O'Neill Partners, L.P., and the cost of the fairness
opinion referenced in Section 9.06, shall be borne by Lincoln whether or not the
Merger is consummated. This provision shall survive the Effective Date or the
earlier termination of this Agreement.
13.10 .Certain Definitions. For purposes of this Agreement, the term:
"First Merchants' Management" shall mean any of Michael C. Rechin,
Mark K. Hardwick and Michael J. Stewart.
"Knowledge" as used with respect to Lincoln's Management or First
Merchants' Management (including references to any such person knowing or
being aware of a particular matter or any similar formulation) shall mean
matters that are within the actual conscious knowledge of any such person
after due inquiry.
<page>
"Lincoln's Management" shall mean any of Jerry R. Engle, John Ditmars,
John Baer and Jonathan D. Slaughter.
"Subsidiary" means, with reference to any corporation, partnership,
limited liability company, business trust, joint venture or other entity,
ownership by such entity, directly or indirectly, of fifty percent (50%) or
more of the voting equity of such entity, the holders of which are entitled
to vote for the election of a majority of the board of directors or any
similar governing body of such corporation, partnership, limited liability
company, business trust, joint venture or other entity; and as used in this
Agreement, may refer to a direct or indirect Subsidiary of either Lincoln
or First Merchants as the context may require.
13.11 Survival of Contents. The provisions of Sections 7.08, 8.05, 10.02,
13.09 and this Section 13.11 shall survive beyond the termination of this
Agreement. The provisions of Sections 7.11, 7.16, 7.17, 8.03, 8.06, 8.07, 8.08,
13.01, 13.09 and this Section 13.11 shall survive beyond the Effective Date.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
<page>
IN WITNESS WHEREOF, First Merchants and Lincoln have made and entered into
this Agreement as of the day and year first above written and have caused this
Agreement to be executed and attested by their duly authorized officers.
FIRST MERCHANTS CORPORATION
By: /S/ Michael C. Rechin
--------------------------------------
Michael C. Rechin, President
and Chief Executive Officer
LINCOLN BANCORP
By: /s/ Jerry R. Engle
--------------------------------------
Jerry R. Engle, Chairman of the Board,
President and Chief Executive Officer
Lincoln Bank hereby joins in this Agreement of Reorganization and Merger as
of the day and year first above written for the purpose of covenanting and
agreeing to cause its duly authorized officer to execute and deliver the
Agreement and Plan of Merger contemporaneously herewith.
LINCOLN BANK
By:/s/ Jerry R. Engle
---------------------------------------
Jerry R. Engle, President
and Chief Executive Officer
First Merchants Bank of Central Indiana hereby joins in this Agreement of
Reorganization and Merger as of the day and year first above written for the
purpose of covenanting and agreeing to cause its duly authorized officer to
execute and deliver the Agreement and Plan of Merger contemporaneously herewith.
FIRST MERCHANTS BANK OF CENTRAL INDIANA
By:/s/ Michael L. Baker
---------------------------------------
Michael L. Baker, President
and Chief Executive Officer
<page>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
Merging
LINCOLN BANK,
an Indiana state bank,
with and into
FIRST MERCHANTS BANK OF CENTRAL INDIANA, NATIONAL ASSOCIATION
a national banking association
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement and Plan"), made and
entered into as of the 2nd day of September, 2008, by and between FIRST
MERCHANTS BANK OF CENTRAL INDIANA, NATIONAL ASSOCIATION, a national bank
("FMBCI"), and LINCOLN BANK, an Indiana state bank (the "Bank") (FMBCI and the
Bank are sometimes referred to collectively as the "Constituent Companies").
WITNESSETH
WHEREAS, the Constituent Companies desire to consummate the business
combination transaction outlined in this Agreement and Plan pursuant to which
the Bank will merge with and into FMBCI pursuant to the Bank Merger Act, 12 USC
Section 215a (collectively, the "Law");
WHEREAS, this Agreement and Plan is being executed in connection with, and
the consummation of this Agreement and Plan is expressly contingent upon the
closing of, that certain Agreement of Reorganization and Merger (the "Merger
Agreement") between First Merchants Corporation ("First Merchants") and Lincoln
Bancorp ("Lincoln") dated September 2, 2008 (the "Holding Company Merger");
WHEREAS, the Boards of Directors of both FMBCI and the Bank have approved
the transactions contemplated by this Agreement;
WHEREAS, First Merchants, as the sole shareholder of FMBCI, and Lincoln, as
the sole shareholder of the Bank, have also approved the transactions
contemplated by this Agreement and Plan;
NOW, THEREFORE, in consideration of the premises and of the mutual
provisions, agreements, covenants, conditions and grants contained in this
Agreement and Plan, and in accordance with the provisions of the Law, the
parties mutually covenant and agree as follows:
<page>
ARTICLE I
The Merger
1.1. The Merger. At the Effective Time (as defined below), the Bank shall
be merged with and into FMBCI in accordance with applicable provisions of the
Law (the "Merger"). The separate existence and company organization of the Bank
shall cease, and the company existence of FMBCI, including all its purposes,
powers and objectives, shall continue unaffected and unimpaired by the Merger.
FMBCI shall continue to be governed by the applicable laws of The National Bank
Act and the regulations promulgated thereunder and shall succeed to all the
rights, privileges, immunities, powers, duties and liabilities of the Bank as
set forth in the Law.
1.2. Further Assurances. If, after the Effective Time, FMBCI shall consider
or be advised that any further deeds, assignments or assurances in the Law or
any other things are necessary or desirable to (a) vest, perfect or confirm, of
record or otherwise, in FMBCI, its right, title or interest in, to or under any
rights, properties or assets of the Bank, or (b) otherwise carry out the
purposes of this Agreement and Plan, the Bank and its officers and directors
shall be deemed to have granted to FMBCI an irrevocable power of attorney to
execute and deliver all such deeds, assignments or assurances in law and to do
all acts necessary or proper to vest, perfect or confirm title to and possession
of such rights, properties or assets in FMBCI and otherwise to carry out the
purposes of this Agreement and Plan, and the officers and directors of FMBCI are
authorized in the name of the Bank or otherwise to take any and all such action.
1.3. Offices. Immediately following the Merger, FMBCI's principal office
shall be located at 33 West 10th Street, Anderson, Indiana 46016 and the Bank's
principal office at 905 Southfield Drive, Plainfield, Indiana 46168 shall become
a branch office of FMBCI.
1.4. Savings Accounts. By virtue of the Merger, savings accounts held at
the Bank shall automatically, by operation of law, become savings accounts held
at FMBCI.
ARTICLE II
Articles of Incorporation, Code of Bylaws,
Board of Directors and Officers
2.1. Name. The name of the surviving Indiana state bank shall be "First
Merchants Bank of Central Indiana, National Association."
2.2. Articles of Incorporation. The Articles of Association of FMBCI shall
be the Articles of Association of the surviving national bank.
2.3. Code of Bylaws. The Code of Bylaws of FMBCI (the "Code of Bylaws")
shall be the Code of Bylaws of the surviving national bank.
<page>
2.4. Officers and Directors. The Directors of FMBCI shall all remain
directors of the surviving national bank and shall hold such offices from the
Effective Time until their respective successors are duly elected and qualified
in the manner provided in the Code of Bylaws. As required by the Merger
Agreement, the Board of Directors of FMBCI will be expanded so that Directors of
the Bank who so desire will be appointed to the Board of Directors of FMBCI for
at least the remainder of the terms for which they have been elected. The
officers of FMBCI shall all remain officers of the surviving national bank and
shall hold such offices from the Effective Time until their respective
successors are duly elected and qualified in the manner provided in the Code of
Bylaws.
ARTICLE III
Capital Stock of the Surviving National Bank
3.1 Shares of the Bank. At the Effective Time, by virtue of the Merger and
without any further action on the part of FMBCI or the Bank, all one thousand
(1,000) issued and outstanding shares of the common capital stock of the Bank,
whose separate existence shall cease, shall automatically and by operation of
law be canceled, void and of no further effect.
3.2 Shares of FMBCI. At the Effective Time, by virtue of the Merger and
without any further action on the part of FMBCI or the Bank, all 114,000 issued
and outstanding shares of the common capital stock of FMBCI, shall represent all
of the issued and outstanding shares of the common capital stock of the
surviving national bank.
ARTICLE IV
No Dissenting Shareholders
First Merchants, as the sole shareholder of FMBCI, and Lincoln, as the sole
shareholder of the Bank, have approved and consented to this Merger.
ARTICLE V
General Provisions
5.1. Condition Precedent to Closing. The following conditions must be
satisfied prior to the closing of the Merger:
(a) appropriate approvals must be obtained from or notices filed with
the Office of the Comptroller of the Currency, the Indiana Department of
Financial Institutions and the Federal Deposit Insurance Corporation; and
(b) the merger of First Merchants and Lincoln contemplated by the
Merger Agreement must occur.
<page>
5.2. Effective Time. The Merger shall become effective immediately
following the Holding Company Merger, or such later time as designated by First
Merchants and otherwise approved by the Office of the Comptroller of the
Currency (the "Effective Time").
5.3. Manner of Termination. This Agreement and Plan and the transactions
contemplated hereby may be terminated at any time prior to the Effective Time:
(a) by the mutual consent of FMBCI and the Bank; or
(b) automatically and without further action by either FMBCI or the
Bank if the Merger Agreement is terminated for any reason.
5.4. Effect of Termination. Upon termination as provided in Section 5.3,
this Agreement and Plan shall be void and of no further force or effect, and
there shall be no obligation on the part of FMBCI or the Bank or their
respective officers, directors, employees, agents, or shareholders, except for
payment of their respective expenses.
[The remainder of this page was intentionally left blank.]
<page>
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan by
their respective officers duly authorized as of the date and year first above
written.
"FMBCI" FIRST MERCHANTS BANK OF CENTRAL
INDIANA, NATIONAL ASSOCIATION,
a national bank,
By: ___________________________________________
Printed: ______________________________________
Its: __________________________________________
ATTEST:_________________________
Secretary/Cashier
"BANK" LINCOLN BANK,
an Indiana state bank,
By: ___________________________________________
Printed: ______________________________________
Its: __________________________________________
ATTEST:_________________________
Secretary/Cashier
<page>
EXHIBIT B-1
Employment Agreement
This Employment Agreement ("Agreement") is made and entered into this 31st
day of December, 2008, by and between JERRY R. ENGLE ("Employee") and FIRST
MERCHANTS BANK OF CENTRAL INDIANA, NATIONAL ASSOCIATION ("Employer"), a national
banking association.
1. Employment.
Employer hereby employs Employee and Employee hereby accepts employment
upon the terms and conditions set forth in this Agreement.
2. Term of Agreement.
Subject to the provisions for termination hereinafter provided, the "Term"
of this Agreement shall commence on December 31, 2008, and continue for a
term of twenty-four (24) months.
3. Duties.
During the Term of this Agreement, Employee shall be the Indianapolis
Regional President and shall perform all duties related and necessary to
that position; provided, however, that such duties shall be regularly
performed in or from an office of the Employer in the greater Indianapolis
area, as directed by Employer. Employee agrees to abide by all by-laws,
policies, practices, procedures, and rules of Employer.
Employee shall devote all of his professional time, efforts, skill and
ability to the business of Employer, and shall not, during the Term of this
Agreement, be engaged in any other business activity, whether or not such
business activity is pursued for gain, profit or other pecuniary advantage,
unless Employee has obtained the prior written approval of Employer; but
this shall not be construed as preventing Employee from investing his
assets in such form or manner as will not require any services on the part
of Employee in the operation of the affairs of the companies in which such
investments are made. Further, this Paragraph 3 shall not prevent Employee
from participating in charitable or other not-for-profit activities as long
as such activities do not materially interfere with Employee's work for
Employer.
4. Business Opportunities.
Employee will take no action that deprives Employer of any business
opportunities within the scope of Employee's existing duties and, should
Employee be offered or become aware of any such opportunities, Employee
shall advise Employer in writing, and Employer shall have the right of
first refusal before Employee pursues such opportunity.
<page>
5. Compensation and Benefits.
Employer shall compensate Employee for services performed during the Term
of this Agreement as follows:
A. Annual Salary. Employer shall pay Employee a total Annual Salary of
Two Hundred Ninety-Seven Thousand and 00/100 Dollars ($297,000.00)
(minus all applicable deductions and withholdings, including federal,
state, and local taxes, and FICA), payable in accordance with
Employer's normal payroll policies. At least annually, if not more
often, Employer shall review and may increase Employee's Annual Salary
as Employer determines to be reasonable and appropriate.
B. Employee's Bonus. In addition to his Annual Salary, Employee may be
paid an Employee Bonus in the sole discretion of Employer.
C. Automobile Allowance. Employer shall pay Employee Eight Hundred and
00/100 Dollars ($800.00) per month, less applicable withholdings to
compensate him for the business use of his automobile. Employee's
automobile shall otherwise be owned, maintained and insured by
Employee at his sole expense.
D. Other Benefits. Employee shall be entitled to all other benefits
otherwise provided to full-time employees of Employer and in
accordance with Employer's policies. The terms and conditions on which
Employer shall provide benefits to Employee are the same as it
provides such benefits to its other management employees holding
positions similar to that of Employee. Employee understands and agrees
that all benefits are subject to change from time to time at the sole
discretion of Employer.
E. Stock Options / Restricted Shares. Pursuant to the Merger Agreement,
as defined in Paragraph 19, Employee is to be provided with 6,400
restricted shares or 24,000 stock options or a combination of both.
Employer will take all steps necessary to confirm that such forms of
deferred compensation are promptly awarded to Employee after the
execution of this Agreement based upon terms and conditions
substantially similar to those included with awards made to other
management employees holding positions similar to that of Employee
with Employer or any affiliate of First Merchants Corporation.
6. Expense Reimbursement.
Employer shall reimburse Employee for all reasonable out-of-pocket expenses
that are incurred by Employee in providing services to Employer hereunder,
so long as Employee provides Employer with reasonable documentation
necessary to support such expenses. All expense reimbursement shall be paid
to Employee consistent with Employer's expense reimbursement policy, in
effect from time to time.
<page>
7. Confidential Information and Return of Property.
Employee acknowledges that in the course of his employment with Employer,
he will occupy a position of trust and confidence and will have access to
and may develop Confidential Information of actual or potential value to,
or otherwise useful to, Employer. "Confidential Information" means
information that the Employer owns or possesses, that it uses or is
potentially useful in its business, that it treats as proprietary, private
or confidential, and that is not generally known to the public, including,
but not limited to, trade secrets (as defined by the Indiana Trade Secrets
Act, Ind. Code sec. 24-2-3-1, et. seq.), information relating to the
Employer's business plans, financial condition, operating and other costs,
sales, pricing, marketing, ideas, research records, plans for service
improvements and development, lists of actual or potential customers,
actual and potential customer usage and requirements, customer records,
trade secrets, and any other information which derives independent economic
value, either actual or potential. Information supplied to Employee from
outside sources will also be presumed to be Confidential Information unless
and until Employer designates it otherwise.
Employee agrees to use Confidential Information solely in the course of his
duties as an employee of Employer and in furtherance of Employer's
business. Employee hereby further agrees that the above-referenced
information will be kept confidential at all times during the Term of this
Agreement and thereafter, that he will not disclose or communicate to any
third party any of the Confidential Information and will not make use of
the Confidential Information on his own behalf or on the behalf of a third
party.
Employee agrees that all Confidential Information is and shall remain the
exclusive property of Employer. Employee agrees to return to Employer on or
before Employee's termination of employment with Employer all Employer
property, information and documents, including and without limitation, all
reports, files, memoranda, records, software, hardware, credit cards, keys,
computer access codes or disks, instruction or operational manuals,
handbooks or manuals, written financial information, business plans or
other physical and personal property which Employee received or prepared or
helped prepare in connection with his employment with Employer; and
Employee agrees that he will not retain any copies, duplicates,
reproductions or excerpts thereof.
This Paragraph 7 shall survive the termination of this Agreement.
8. Non-Solicitation.
A. Customers. Employee shall not, at any time during the Term or for a
period of one (1) year thereafter, directly or indirectly, on
Employee's own behalf or for any other person, firm, corporation or
other business entity: (1) solicit, seek to obtain, divert or
otherwise attempt to take away any of the banking or bank-related
service business of any of Employer's customers; (2) provide services
to or accept the business of any of Employer's customers for the
banking or bank-related service business offered by Employer; or (3)
request or advise any of Employer's customers to terminate, reduce,
limit or otherwise change their banking or bank-related service
business relationship with Employer. For purposes of this Section
8.A., "Employer's customers" shall mean those persons, firms,
corporations and other business entities who are customers of Employer
at the time of Employee's termination of employment with Employer or
who were customers of Employer at any time during the two year period
immediately preceding the termination of Employee's employment with
Employer, whether or not Employee had direct contact with such
customers on behalf of Employer.
<page>
B. Employees. Employee shall not, at any time during the Term or for a
period of one (1) year thereafter, directly or indirectly, on
Employee's own behalf or for any other person, firm, corporation or
other business entity, solicit, induce, request, advise, or otherwise
attempt to take away or to influence any of Employer's employees to
terminate his or her employment with Employer.
C. Exceptions. If Employer terminates this Agreement without Cause, as
set forth in Paragraph 10(D), or Employee terminates the Agreement for
Good Reason, as provided in Paragraph 10(C), the foregoing Customers
and Employees provisions of this Paragraph 8 shall only apply for the
shorter of: (i) one (1) year following termination of this Agreement
or (ii) the remaining portion of the Term (prior to termination) for
which Employee is provided the lump sum payment under Paragraph 10D or
10(C). If the Agreement is not terminated, but rather expires as
provided in Paragraph 2 at the conclusion of the twenty-four (24)
month period, the foregoing Customers and Employees provisions of this
Paragraph 8 shall expire contemporaneously therewith.
9. Breach of Agreement.
A. Employee acknowledges that any breach of Paragraphs 7 or 8 of this
Agreement, by Employee may cause irreparable damage to Employer and
that the legal remedies available to Employer will be inadequate.
Therefore, in the event of any threatened or actual breach of
Paragraphs 7 or 8 of this Agreement by Employee, Employee agrees that
Employer shall be entitled to specific enforcement of this Agreement
through injunctive or other equitable relief in addition to legal
remedies, without the need for posting bond. If Employee is found, by
a court of competent jurisdiction, to have breached any of the terms
of Paragraphs 7 or 8 of this Agreement, Employee agrees to pay
Employer reasonable attorney's fees and costs incurred in seeking
relief from Employee's breach of Paragraphs 7 or 8 of this Agreement.
If a court of competent jurisdiction declines to find a breach by
Employee of Paragraphs 7 or 8 has occurred, Employer agrees to pay
Employee reasonable attorney's fees and costs Employee incurred in
responding to Employer's request for relief.
Employee and Employer hereby submit to the jurisdiction and venue of
the Delaware County, Indiana Courts and the United States District
Court for the Southern District of Indiana, as applicable, in any
cause of action to enforce the terms and conditions of Paragraphs 7 or
8 of this Agreement.
<page>
B. Employee and Employer hereby agree that any claim, controversy, or
dispute arising out of or relating to this Agreement or the breach
thereof, except those identified in Paragraph 9(A) of this Agreement,
shall be settled by binding arbitration in Delaware County, Indiana.
Such arbitration shall be conducted in accordance with the rules of
the American Arbitration Association, then in effect. Each party shall
bear their own attorney's fees and costs in such proceeding.
Arbitration shall be the sole and exclusive method of resolving such
claims, controversies, or disputes under this Agreement.
C. This Paragraph 9 shall survive the termination of this Agreement.
10. Termination.
A. Termination Due to Death. In the event of Employee's death, this
Agreement shall terminate as of the date of Employee's death. If this
Agreement is terminated because of Employee's death, Employee's
benefits shall be determined in accordance with the survivor's
benefits, insurance, and other applicable programs of Employer, then
in effect. Upon Employee's death, Employer's obligations to compensate
Employee under Paragraph 5 of this Agreement shall immediately expire;
provided, however, that within forty-five (45) business days of
Employee's death, Employer shall pay to Employee's estate that portion
of his Annual Salary and Bonus as provided in Paragraphs 5(A) and 5(B)
of this Agreement that shall have been earned through the date of
Employee's death, but not yet paid. Except as otherwise set forth
herein or as otherwise required by applicable law, following the
termination date established pursuant to this Paragraph 10(A),
Employer and Employee (including Employee's heirs, executors,
administrators, and personal representatives) shall have no further
obligations to each other under this Agreement.
B. Termination Due to Disability. In the event Employee suffers a
Disability, as defined herein, during the Term of Employment and is,
therefore, unable to perform the duties required by the Agreement for
more than ninety (90) calendar days during any consecutive twelve (12)
month period, Employer shall have the right to terminate this
Agreement and Employee's employment. Employer shall deliver written
notice to Employee of Employer's intent to terminate this Agreement
pursuant to this Paragraph 10(B) and specifying in such notice a
termination date not less than thirty (30) days after the giving of
the notice ("Disability Notice Period"). This Agreement and Employee's
employment shall terminate at the close of business on the last day of
the Disability Notice Period.
If this Agreement is terminated because of Employee's Disability,
Employee shall be entitled to receive any applicable disability
insurance benefits as allowed under Paragraph 5 (D) of this Agreement.
Upon termination of this Agreement pursuant to this Paragraph 10(B),
Employer's obligations to compensate Employee under Paragraph 5 of
this Agreement shall immediately expire; provided, however, that
within forty-five (45) business days after the termination of this
Agreement, Employer shall pay to Employee that portion of his Annual
Salary and Bonus as provided in Paragraphs 5(A) and 5(B) of this
Agreement that shall have been earned through the termination date,
but not yet paid. Except as otherwise set forth herein or as otherwise
required by applicable law, following the termination date established
pursuant to this Paragraph 10(B), Employer and Employee shall have no
further obligations to each other under this Agreement.
<page>
For purposes of this Agreement only, the term "Disability" shall mean,
the inability of Employee, because of injury, illness, disease, or
bodily or mental infirmity, to engage in the performance of
substantially all of the duties required by this Agreement with or
without a reasonable accommodation. Employer shall reasonably and
fairly determine such Disability upon receipt of, and in reliance on,
medical advice from a licensed physician or physicians qualified to
give professional medical advice.
C. Termination by Employee. Employee may terminate this Agreement at any
time, with or without Good Reason, by providing Employer written
notice of his intent to terminate this Agreement pursuant to this
Paragraph 10(C) and specifying in such notice a termination date not
less than thirty (30) days after the giving of the notice ("Employee's
Notice Period"). This Agreement and Employee's employment shall
terminate at the close of business on the last day of Employee's
Notice Period.
For purposes of this Paragraph 10(C), "Good Reason" shall be defined
as: (i) any action by Employer to remove Employee as Indianapolis
Regional President of Employer, except for promotions, if any, and
except where Employer properly acts to remove Employee for Cause as
defined in Paragraph 10(D) below, (ii) any action by Employer to
materially limit, increase or modify Employee's duties and/or
authority as Indianapolis Regional President of Employer or to
otherwise change the regular work location of Employee outside of the
greater Indianapolis area, (iii) any failure of Employer to obtain the
assumption of the obligation to perform this Agreement by any
successor of Employer, or (iv) any material breach by Employer of a
term, condition or covenant of this Agreement.
If Employee terminates this Agreement pursuant to this Paragraph
10(C), Employee shall immediately upon the termination of this
Agreement forfeit all rights and benefits to which he would otherwise
have been entitled under this Agreement; provided, however, that
within fifteen (15) business days after the termination of this
Agreement pursuant to this Paragraph 10(C),
1. If termination by Employee is without Good Reason, Employer shall
pay to Employee that portion of his Annual Salary as provided in
Paragraph 5(A) of this Agreement that shall have been earned
through the termination date, but not yet paid; or
2. If termination by Employee is with Good Reason, Employer shall
pay to Employee a lump sum payment equal to remaining portion of
Employee's Annual Salary as provided in Paragraph 5(A) for the
Term then in effect, plus that portion of Employee's Bonus as
provided in Paragraph 5(B) of this Agreement that shall have been
earned through the termination date, but not yet paid.
<page>
Except as otherwise set forth herein or as otherwise required by
applicable law, following the termination date established
pursuant to this Paragraph 10(C), Employer and Employee shall
have no further obligations to each other under this Agreement.
D. Termination by Employer Without Cause. At any time during the Term of
Employment, Employer may terminate this Agreement (and, thus,
terminate Employee's Employment) for any reason by providing Employee
written notice of its intent to terminate this Agreement pursuant to
this Paragraph 10(D) and specifying in such notice a termination date
not less than thirty (30) days after the giving of the notice
("Employer's Notice Period"). This Agreement and Employee's employment
shall terminate at the close of business on the last day of Employer's
Notice Period.
If this Agreement is terminated pursuant to this Paragraph 10(D),
Employee shall immediately upon the termination of this Agreement
forfeit all rights and benefits to which he would otherwise have been
entitled under this Agreement; provided, however, that within fifteen
(15) business days after the termination of this Agreement pursuant to
this Paragraph 10(D), Employer shall pay to Employee a lump sum
payment equal to remaining portion of Employee's Annual Salary as
provided in Paragraph 5(A) for the Term then in effect, plus that
portion of Employee's Bonus as provided in Paragraph 5(B) of this
Agreement that shall have been earned through the termination date,
but not yet paid. Except as otherwise set forth herein or as otherwise
required by applicable law, following the termination date established
pursuant to this Paragraph 10(D), Employer and Employee shall have no
further obligations to each other under this Agreement.
E. Termination by Employer With Cause. At any time during the Term of
Employment, Employer may terminate this Agreement and Employee's
Employment for "Cause." The term "Cause" as used herein shall mean a
reasonable determination by Employer that Employee:
1. Engaged in willful and continued failure to perform substantially
Employee's duties with Employer if such failure continues for a
period of thirty (30) days after Employer delivers to Employee
written demand for substantial performance, specifically
identifying the manner in which Employee has not substantially
performed his duties;
2. Engaged in unauthorized conduct and behavior that has the
likelihood of exposing Employer to material liability or
otherwise significantly jeopardizing Employer's business
interests;
3. Has been convicted of any crime constituting a felony or
involving moral turpitude or controlled substance;
<page>
4. Materially breached any term or condition of this Agreement; or
5. As otherwise defined in this Agreement.
Upon the occurrence of any of the foregoing, Employer may provide
Employee written notice of its intent to terminate this Agreement
pursuant to this Paragraph 10(E) and this Agreement and
Employee's employment shall terminate at the close of business on
the date on which Employer provides such notice.
If this Agreement is terminated pursuant to this Paragraph 10(E),
Employee shall immediately upon the termination of this Agreement
forfeit all rights and benefits to which he would otherwise have
been entitled under this Agreement; provided, however, that
Employer shall pay to Employee in accordance with Employer's
normal payroll practices, that portion of Employee's Annual
Salary as provided in Paragraph 5(A) of this Agreement that shall
have been earned through the termination date. Except as
otherwise set forth herein or as otherwise required by applicable
law, following the termination date established pursuant to this
Paragraph 10(E), Employer and Employee shall have no further
obligations to each other under this Agreement.
F. Exception to Loss of Rights and Benefits. Notwithstanding any contrary
provisions contained herein, termination of this Agreement for any
reason shall not otherwise terminate the rights and benefits held by
Employee under any separate written agreement between Employee and
Employer or any affiliate of First Merchants Corporation, including,
but not limited to, Employee's rights and benefits under any change in
control agreement, stock options, restricted share awards, other
deferred compensation agreements, and the Merger Agreement, as defined
in Paragraph 19.
11. Indemnification of Employee.
Employer shall indemnify Employee to the fullest extent permitted by
Employer's articles of incorporation, by-laws and applicable federal or
state laws for all amounts (including, without limitation, judgments,
fines, settlement payments, expenses and attorneys' fees) incurred or paid
by Employee in connection with any action, suit, investigation or
proceeding arising out of or relating to the performance by Employee or
services for, or the acting by Employee as a director, officer or employee
of, Employer, any subsidiary of Employer or any other person or enterprise
at Employer's request. Expenses, including but not limited to attorneys'
fees and disbursements, incurred in defending any action, suit,
investigation or proceeding, for which Employee may be entitled to
indemnification under this Paragraph 11 upon final disposition of such
action, shall be paid by Employer in advance of the final disposition, to
the maximum extent permitted by applicable laws and regulations; provided,
however, that prior to making any such payments Employer shall receive an
undertaking by or on behalf of Employee to repay such amounts if it shall
ultimately be determined that he is not entitled to indemnification.
<page>
12. Suspension.
If Employee is suspended and/or temporarily prohibited from participating
in the conduct of Employer's affairs by a notice served under Section
8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section
1818(e)(3) and (g)(1)), Employer's obligations under this Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, Employer shall (i)
pay Employee all or part of the compensation withheld while its obligations
under this Agreement were suspended and (ii) reinstate (in whole or in
part) any of its obligations which were suspended.
13. Removal or Prohibition.
If Employee is removed and/or permanently prohibited from participating in
the conduct of Employer's affairs by an order issued under section 8(e)(4)
or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.Section 1818(e)(4)
or (g)(1)), all obligations of Employer under this Agreement shall
terminate as of the effective date of the order and shall be considered a
termination of Employee by Employer for "Cause" pursuant to Paragraph 10(E)
of this Agreement.
14. Default of Employer.
If Employer is in default (as defined in section 3(x)(1) of the Federal
Deposit Insurance Act), all obligations under this Agreement shall
terminate as of the date of default, and shall be considered a termination
of Employee by Employer for "Cause" pursuant to Paragraph 10(E) of this
Agreement.
15. Termination by Regulatory Action.
All obligations under this Agreement may be terminated except to the extent
determined that the continuation of the Agreement is necessary for the
continued operation of Employer: (i) by the Office of the Comptroller of
the Currency (the "Controller"), at the time the Federal Deposit Insurance
Corporation enters into an agreement to provide assistance to or on behalf
of Employer under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act; or (ii) by the Controller at the time the Controller
approves a supervisory merger to resolve problems related to operation of
Employer or when Employer is determined to be in an unsafe and unsound
condition.
16. Conflict with Regulations.
If any of the provisions in this Agreement shall conflict with 12 C.F.R.
Section 30, Appendix A, or the Controller policies adopted thereunder (as
the same may be amended from time to time) the requirements of such
regulation shall supersede any contrary provisions herein and shall
prevail.
<page>
17. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of Employer, and unless clearly inapplicable, all
references herein to Employer shall be deemed to include any such
successor. In addition, this Agreement shall be binding upon and inure to
the benefit of Employee and his heirs, executors, legal representatives and
assigns; provided, however, that the obligations of Employee hereunder are
personal in nature and may not be delegated without the prior written
approval of Employer.
18. Choice of Law.
This Agreement shall be interpreted, construed, and governed by the laws of
the State of Indiana, regardless of the place of execution or performance.
19. Entire Agreement
This Agreement contains the entire agreement of the parties and replaces
and supersedes all employment agreements between Employee and Lincoln
Bancorp or Lincoln Bank, including, but not limited to that certain Amended
and Restated Employment Agreement between Lincoln Bank and Employee dated
October 1, 2007 and effective as of January 1, 2005 (the "Lincoln
Agreements"). Notwithstanding the foregoing, the obligation to make the
lump sum payment upon Change in Control, as provided in the Lincoln
Agreements and reaffirmed in the Agreement of Reorganization and Merger
Between First Merchants Corporation and Lincoln Bancorp entered into this
same date (the "Merger Agreement"), shall not be superseded or replaced,
but shall continue to be in full force and effect.
This Agreement may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
This Agreement may be executed in multiple counterparts, each of which (or
a facsimile thereof) shall be deemed an original, but all of which shall be
considered a single instrument.
20. Severability.
If any provision of this Agreement shall be held by a court of competent
jurisdiction to be contrary to law or public policy, the remaining
provisions shall remain in full force and effect.
21. Notice.
Any notices, requests, demands, or other communications provided for by
this Agreement shall be sufficient if in writing and if (i) delivered by
hand to the other party; (ii) sent by facsimile communication with
appropriate confirmation of delivery; (iii) sent by registered or certified
United States Mail, return receipt requested, with all postage prepaid; or
(iv) sent by recognized commercial express courier services, with all
delivery charges prepaid; and addressed as follows:
<page>
If to Employer:
First Merchants Bank of Central Indiana, National Association
_________________________
_________________________
_________________________
_________________________
If to Employee:
Jerry R. Engle
345 South Oakwood Drive
Greenwood, Indiana 46142
or to such other address as either party hereto may have furnished to the
other party in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
22. Successor.
Employer shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business or assets of Employer, by agreement in form and substance
satisfactory to Employee to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Employer would be
required to perform it if no such succession had taken place. Failure of
Employer to obtain such agreement prior to the effectiveness of any such
succession shall be a material intentional breach of this Agreement and
shall entitle Employee to terminate this Agreement with Good Reason
pursuant to Paragraph 10(C) herein. Any successor assuming this Agreement
shall be subject to the obligations of this Paragraph 22, similar to
Employer.
23. Acknowledgement.
Employee represents and acknowledges that Employee has had adequate time to
review this Agreement, Employee has had the opportunity to ask questions
and receive answers from Employer regarding this Agreement, and Employee
has had the opportunity to consult with legal advisors of his choice
concerning the terms and conditions of this Agreement.
This Agreement is intended to supersede and replace all prior agreements,
understandings and arrangements between or among Employer, or any agent
thereof, and the Employee, or any agent thereof, relating to the employment
of Employee.
[THIS SPACE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE TO FOLLOW].
<page>
IN WITNESS WHEREOF, the parties hereto have voluntarily executed this
Agreement as of the day and year first above written.
"EMPLOYER" "EMPLOYEE"
FIRST MERCHANTS BANK OF JERRY R. ENGLE
CENTRAL INDIANA,
NATIONAL ASSOCIATION
By:___________________________________ __________________________________
Jerry R. Engle
_____________________________________
(Printed)
The undersigned, First Merchants Corporation, sole shareholder of Employer,
agrees that if it shall be determined for any reason that any obligation on the
part of Employer to continue to make any payments due under this Agreement to
Employee is unenforceable for any reason, First Merchants Corporation agrees to
honor the terms of this Agreement and continue to make any such payments due
hereunder to Employee pursuant to the terms of this Agreement.
As otherwise provided in the Agreement of Reorganization and Merger Between
First Merchants Corporation and Lincoln Bancorp, entered into this same date,
First Merchants shall nominate and/or appoint Employee to serve as a member of
First Merchant Corporation's Board of Directors, and, as a director of First
Merchants Corporation, Employee shall be entitled to the same benefits and
compensation for services as provided to other employee-directors of First
Merchants Corporation.
FIRST MERCHANTS CORPORATION
_____________________________________
Michael C. Rechin, President and
Chief Executive Officer
<page>
EXHIBIT B-2
Ditmars Employment Agreement
This Employment Agreement ("Agreement") is made and entered into this 31st
day of December, 2008, by and between JOHN B. DITMARS ("Employee") and FIRST
MERCHANTS BANK OF CENTRAL INDIANA, NATIONAL ASSOCIATION ("Employer"), a national
banking association.
1. Employment.
Employer hereby employs Employee and Employee hereby accepts employment
upon the terms and conditions set forth in this Agreement.
2. Term of Agreement.
Subject to the provisions for termination hereinafter provided, the "Term"
of this Agreement shall commence on December 31, 2008, and continue for a
term of twenty-four (24) months.
3. Duties.
During the Term of this Agreement, Employee shall be a Senior Vice
President and shall perform all duties related and necessary to that
position; provided, however, that such duties shall be regularly performed
in or from an office of the Employer in the greater Indianapolis area, as
directed by Employer. Employee agrees to abide by all by-laws, policies,
practices, procedures, and rules of Employer.
Employee shall devote all of his professional time, efforts, skill and
ability to the business of Employer, and shall not, during the Term of this
Agreement, be engaged in any other business activity, whether or not such
business activity is pursued for gain, profit or other pecuniary advantage,
unless Employee has obtained the prior written approval of Employer; but
this shall not be construed as preventing Employee from investing his
assets in such form or manner as will not require any services on the part
of Employee in the operation of the affairs of the companies in which such
investments are made. Further, this Paragraph 3 shall not prevent Employee
from participating in charitable or other not-for-profit activities as long
as such activities do not materially interfere with Employee's work for
Employer.
4. Business Opportunities.
Employee will take no action that deprives Employer of any business
opportunities within the scope of Employee's existing duties and, should
Employee be offered or become aware of any such opportunities, Employee
shall advise Employer in writing, and Employer shall have the right of
first refusal before Employee pursues such opportunity.
<page>
5. Compensation and Benefits.
Employer shall compensate Employee for services performed during the Term
of this Agreement as follows:
A. Annual Salary. Employer shall pay Employee a total Annual Salary of
One Hundred Eighty-Eight Thousand and 00/100 Dollars ($188,000.00)
(minus all applicable deductions and withholdings, including federal,
state, and local taxes, and FICA), payable in accordance with
Employer's normal payroll policies. At least annually, if not more
often, Employer shall review and may increase Employee's Annual Salary
as Employer determines to be reasonable and appropriate.
B. Employee's Bonus. In addition to his Annual Salary, Employee may be
paid an Employee Bonus in the sole discretion of Employer.
C. Automobile Allowance. Employer shall pay Employee Four Hundred and
00/100 Dollars ($400.00) per month, less applicable withholdings to
compensate him for the business use of his automobile. Employee's
automobile shall otherwise be owned, maintained and insured by
Employee at his sole expense.
D. Other Benefits. Employee shall be entitled to all other benefits
otherwise provided to full-time employees of Employer and in
accordance with Employer's policies. The terms and conditions on which
Employer shall provide benefits to Employee are the same as it
provides such benefits to its other management employees holding
positions similar to that of Employee. Employee understands and agrees
that all benefits are subject to change from time to time at the sole
discretion of Employer.
E. Stock Options / Restricted Shares. Pursuant to the Merger Agreement,
as defined in Paragraph 19, Employee is to be provided with 6,400
restricted shares or 24,000 stock options or a combination of both.
Employer will take all steps necessary to confirm that such forms of
deferred compensation are promptly awarded to Employee after the
execution of this Agreement based upon terms and conditions
substantially similar to those included with awards made to other
management employees holding positions similar to that of Employee
with Employer or any affiliate of First Merchants Corporation.
6. Expense Reimbursement.
Employer shall reimburse Employee for all reasonable out-of-pocket expenses
that are incurred by Employee in providing services to Employer hereunder,
so long as Employee provides Employer with reasonable documentation
necessary to support such expenses. All expense reimbursement shall be paid
to Employee consistent with Employer's expense reimbursement policy, in
effect from time to time.
<page>
7. Confidential Information and Return of Property.
Employee acknowledges that in the course of his employment with Employer,
he will occupy a position of trust and confidence and will have access to
and may develop Confidential Information of actual or potential value to,
or otherwise useful to, Employer. "Confidential Information" means
information that the Employer owns or possesses, that it uses or is
potentially useful in its business, that it treats as proprietary, private
or confidential, and that is not generally known to the public, including,
but not limited to, trade secrets (as defined by the Indiana Trade Secrets
Act, Ind. Code sec. 24-2-3-1, et. seq.), information relating to the
Employer's business plans, financial condition, operating and other costs,
sales, pricing, marketing, ideas, research records, plans for service
improvements and development, lists of actual or potential customers,
actual and potential customer usage and requirements, customer records,
trade secrets, and any other information which derives independent economic
value, either actual or potential. Information supplied to Employee from
outside sources will also be presumed to be Confidential Information unless
and until Employer designates it otherwise.
Employee agrees to use Confidential Information solely in the course of his
duties as an employee of Employer and in furtherance of Employer's
business. Employee hereby further agrees that the above-referenced
information will be kept confidential at all times during the Term of this
Agreement and thereafter, that he will not disclose or communicate to any
third party any of the Confidential Information and will not make use of
the Confidential Information on his own behalf or on the behalf of a third
party.
Employee agrees that all Confidential Information is and shall remain the
exclusive property of Employer. Employee agrees to return to Employer on or
before Employee's termination of employment with Employer all Employer
property, information and documents, including and without limitation, all
reports, files, memoranda, records, software, hardware, credit cards, keys,
computer access codes or disks, instruction or operational manuals,
handbooks or manuals, written financial information, business plans or
other physical and personal property which Employee received or prepared or
helped prepare in connection with his employment with Employer; and
Employee agrees that he will not retain any copies, duplicates,
reproductions or excerpts thereof.
This Paragraph 7 shall survive the termination of this Agreement.
8. Non-Solicitation.
A. Customers. Employee shall not, at any time during the Term or for a
period of one (1) year thereafter, directly or indirectly, on
Employee's own behalf or for any other person, firm, corporation or
other business entity: (1) solicit, seek to obtain, divert or
otherwise attempt to take away any of the banking or bank-related
service business of any of Employer's customers; (2) provide services
to or accept the business of any of Employer's customers for the
banking or bank-related service business offered by Employer; or (3)
request or advise any of Employer's customers to terminate, reduce,
limit or otherwise change their banking or bank-related service
business relationship with Employer. For purposes of this Section
8.A., "Employer's customers" shall mean those persons, firms,
corporations and other business entities who are customers of Employer
at the time of Employee's termination of employment with Employer or
who were customers of Employer at any time during the two year period
immediately preceding the termination of Employee's employment with
Employer, whether or not Employee had direct contact with such
customers on behalf of Employer.
<page>
B. Employees. Employee shall not, at any time during the Term or for a
period of one (1) year thereafter, directly or indirectly, on
Employee's own behalf or for any other person, firm, corporation or
other business entity, solicit, induce, request, advise, or otherwise
attempt to take away or to influence any of Employer's employees to
terminate his or her employment with Employer.
C. Exceptions. If: (a) Employer terminates this Agreement without Cause,
as set forth in Paragraph 10(D); or (b) Employee terminates the
Agreement for Good Reason, as provided in Paragraph 10(C), the
foregoing Customers and Employees provisions of this Paragraph 8 shall
only apply for the shorter of: (i) one (1) year following termination
of this Agreement or (ii) the remaining portion of the Term (prior to
termination) for which Employee is provided the lump sum payment under
Paragraph 10D or 10(C). If the Agreement is not terminated, but rather
expires as provided in Paragraph 2 at the conclusion of the
twenty-four (24) month period, the foregoing Customers and Employees
provisions of this Paragraph 8 shall expire contemporaneously
therewith.
9. Breach of Agreement.
A. Employee acknowledges that any breach of Paragraphs 7 or 8 of this
Agreement, by Employee may cause irreparable damage to Employer and
that the legal remedies available to Employer will be inadequate.
Therefore, in the event of any threatened or actual breach of
Paragraphs 7 or 8 of this Agreement by Employee, Employee agrees that
Employer shall be entitled to specific enforcement of this Agreement
through injunctive or other equitable relief in addition to legal
remedies, without the need for posting bond. If Employee is found, by
a court of competent jurisdiction, to have breached any of the terms
of Paragraphs 7 or 8 of this Agreement, Employee agrees to pay
Employer reasonable attorney's fees and costs incurred in seeking
relief from Employee's breach of Paragraphs 7 or 8 of this Agreement.
If a court of competent jurisdiction declines to find a breach by
Employee of Paragraphs 7 or 8 has occurred, Employer agrees to pay
Employee reasonable attorney's fees and costs Employee incurred in
responding to Employer's request for relief.
Employee and Employer hereby submit to the jurisdiction and venue of
the Delaware County, Indiana Courts and the United States District
Court for the Southern District of Indiana, as applicable, in any
cause of action to enforce the terms and conditions of Paragraphs 7 or
8 of this Agreement.
<page>
B. Employee and Employer hereby agree that any claim, controversy, or
dispute arising out of or relating to this Agreement or the breach
thereof, except those identified in Paragraph 9(A) of this Agreement,
shall be settled by binding arbitration in Delaware County, Indiana.
Such arbitration shall be conducted in accordance with the rules of
the American Arbitration Association, then in effect. Each party shall
bear their own attorney's fees and costs in such proceeding.
Arbitration shall be the sole and exclusive method of resolving such
claims, controversies, or disputes under this Agreement.
C. This Paragraph 9 shall survive the termination of this Agreement.
10. Termination.
A. Termination Due to Death. In the event of Employee's death, this
Agreement shall terminate as of the date of Employee's death. If this
Agreement is terminated because of Employee's death, Employee's
benefits shall be determined in accordance with the survivor's
benefits, insurance, and other applicable programs of Employer, then
in effect. Upon Employee's death, Employer's obligations to compensate
Employee under Paragraph 5 of this Agreement shall immediately expire;
provided, however, that within forty-five (45) business days of
Employee's death, Employer shall pay to Employee's estate that portion
of his Annual Salary and Bonus as provided in Paragraphs 5(A) and 5(B)
of this Agreement that shall have been earned through the date of
Employee's death, but not yet paid. Except as otherwise set forth
herein or as otherwise required by applicable law, following the
termination date established pursuant to this Paragraph 10(A),
Employer and Employee (including Employee's heirs, executors,
administrators, and personal representatives) shall have no further
obligations to each other under this Agreement.
B. Termination Due to Disability. In the event Employee suffers a
Disability, as defined herein, during the Term of Employment and is,
therefore, unable to perform the duties required by the Agreement for
more than ninety (90) calendar days during any consecutive twelve (12)
month period, Employer shall have the right to terminate this
Agreement and Employee's employment. Employer shall deliver written
notice to Employee of Employer's intent to terminate this Agreement
pursuant to this Paragraph 10(B) and specifying in such notice a
termination date not less than thirty (30) days after the giving of
the notice ("Disability Notice Period"). This Agreement and Employee's
employment shall terminate at the close of business on the last day of
the Disability Notice Period.
If this Agreement is terminated because of Employee's Disability,
Employee shall be entitled to receive any applicable disability
insurance benefits as allowed under Paragraph 5 (D) of this Agreement.
Upon termination of this Agreement pursuant to this Paragraph 10(B),
Employer's obligations to compensate Employee under Paragraph 5 of
this Agreement shall immediately expire; provided, however, that
within forty-five (45) business days after the termination of this
Agreement, Employer shall pay to Employee that portion of his Annual
Salary and Bonus as provided in Paragraphs 5(A) and 5(B) of this
Agreement that shall have been earned through the termination date,
but not yet paid. Except as otherwise set forth herein or as otherwise
required by applicable law, following the termination date established
pursuant to this Paragraph 10(B), Employer and Employee shall have no
further obligations to each other under this Agreement.
<page>
For purposes of this Agreement only, the term "Disability" shall mean,
the inability of Employee, because of injury, illness, disease, or
bodily or mental infirmity, to engage in the performance of
substantially all of the duties required by this Agreement with or
without a reasonable accommodation. Employer shall reasonably and
fairly determine such Disability upon receipt of, and in reliance on,
medical advice from a licensed physician or physicians qualified to
give professional medical advice.
C. Termination by Employee. Employee may terminate this Agreement at any
time, with or without Good Reason, by providing Employer written
notice of his intent to terminate this Agreement pursuant to this
Paragraph 10(C) and specifying in such notice a termination date not
less than thirty (30) days after the giving of the notice ("Employee's
Notice Period"). This Agreement and Employee's employment shall
terminate at the close of business on the last day of Employee's
Notice Period.
For purposes of this Paragraph 10(C), "Good Reason" shall be defined
as: (i) any action by Employer to remove Employee as Senior Vice
President of Employer, except for promotions, if any, and except where
Employer properly acts to remove Employee for Cause as defined in
Paragraph 10(D) below, (ii) any action by Employer to materially
limit, increase or modify Employee's duties and/or authority as Senior
Vice President of Employer or to otherwise change the regular work
location of Employee outside of the greater Indianapolis area, (iii)
any failure of Employer to obtain the assumption of the obligation to
perform this Agreement by any successor of Employer, or (iv) any
material breach by Employer of a term, condition or covenant of this
Agreement.
If Employee terminates this Agreement pursuant to this Paragraph
10(C), Employee shall immediately upon the termination of this
Agreement forfeit all rights and benefits to which he would otherwise
have been entitled under this Agreement; provided, however, that
within fifteen (15) business days after the termination of this
Agreement pursuant to this Paragraph 10(C),
1. If termination by Employee is without Good Reason, Employer shall
pay to Employee that portion of his Annual Salary as provided in
Paragraph 5(A) of this Agreement that shall have been earned
through the termination date, but not yet paid; or
2. If termination by Employee is with Good Reason, Employer shall
pay to Employee a lump sum payment equal to remaining portion of
Employee's Annual Salary as provided in Paragraph 5(A) for the
Term then in effect, plus that portion of Employee's Bonus as
provided in Paragraph 5(B) of this Agreement that shall have been
earned through the termination date, but not yet paid.
<page>
Except as otherwise set forth herein or as otherwise required by
applicable law, following the termination date established
pursuant to this Paragraph 10(C), Employer and Employee shall
have no further obligations to each other under this Agreement.
D. Termination by Employer Without Cause. At any time during the Term of
Employment, Employer may terminate this Agreement (and, thus,
terminate Employee's Employment) for any reason by providing Employee
written notice of its intent to terminate this Agreement pursuant to
this Paragraph 10(D) and specifying in such notice a termination date
not less than thirty (30) days after the giving of the notice
("Employer's Notice Period"). This Agreement and Employee's employment
shall terminate at the close of business on the last day of Employer's
Notice Period.
If this Agreement is terminated pursuant to this Paragraph 10(D),
Employee shall immediately upon the termination of this Agreement
forfeit all rights and benefits to which he would otherwise have been
entitled under this Agreement; provided, however, that within fifteen
(15) business days after the termination of this Agreement pursuant to
this Paragraph 10(D), Employer shall pay to Employee a lump sum
payment equal to remaining portion of Employee's Annual Salary as
provided in Paragraph 5(A) for the Term then in effect, plus that
portion of Employee's Bonus as provided in Paragraph 5(B) of this
Agreement that shall have been earned through the termination date,
but not yet paid. Except as otherwise set forth herein or as otherwise
required by applicable law, following the termination date established
pursuant to this Paragraph 10(D), Employer and Employee shall have no
further obligations to each other under this Agreement.
E. Termination by Employer With Cause. At any time during the Term of
Employment, Employer may terminate this Agreement and Employee's
Employment for "Cause." The term "Cause" as used herein shall mean a
reasonable determination by Employer that Employee:
1. Engaged in willful and continued failure to perform substantially
Employee's duties with Employer if such failure continues for a
period of thirty (30) days after Employer delivers to Employee
written demand for substantial performance, specifically
identifying the manner in which Employee has not substantially
performed his duties;
2. Engaged in unauthorized conduct and behavior that has the
likelihood of exposing Employer to material liability or
otherwise significantly jeopardizing Employer's business
interests;
3. Has been convicted of any crime constituting a felony or
involving moral turpitude or controlled substance;
<page>
4. Materially breached any term or condition of this Agreement; or
5. As otherwise defined in this Agreement.
Upon the occurrence of any of the foregoing, Employer may provide
Employee written notice of its intent to terminate this Agreement
pursuant to this Paragraph 10(E) and this Agreement and
Employee's employment shall terminate at the close of business on
the date on which Employer provides such notice.
If this Agreement is terminated pursuant to this Paragraph 10(E),
Employee shall immediately upon the termination of this Agreement
forfeit all rights and benefits to which he would otherwise have
been entitled under this Agreement; provided, however, that
Employer shall pay to Employee in accordance with Employer's
normal payroll practices, that portion of Employee's Annual
Salary as provided in Paragraph 5(A) of this Agreement that shall
have been earned through the termination date. Except as
otherwise set forth herein or as otherwise required by applicable
law, following the termination date established pursuant to this
Paragraph 10(E), Employer and Employee shall have no further
obligations to each other under this Agreement.
F. Exception to Loss of Rights and Benefits. Notwithstanding any contrary
provisions contained herein, termination of this Agreement for any
reason shall not otherwise terminate the rights and benefits held by
Employee under any separate written agreement between Employee and
Employer or any affiliate of First Merchants Corporation, including,
but not limited to, Employee's rights and benefits under any change in
control agreement, stock options, restricted share awards, other
deferred compensation agreements, and the Merger Agreement, as defined
in Paragraph 19.
11. Indemnification of Employee.
Employer shall indemnify Employee to the fullest extent permitted by
Employer's articles of incorporation, by-laws and applicable federal or
state laws for all amounts (including, without limitation, judgments,
fines, settlement payments, expenses and attorneys' fees) incurred or paid
by Employee in connection with any action, suit, investigation or
proceeding arising out of or relating to the performance by Employee or
services for, or the acting by Employee as a director, officer or employee
of, Employer, any subsidiary of Employer or any other person or enterprise
at Employer's request. Expenses, including but not limited to attorneys'
fees and disbursements, incurred in defending any action, suit,
investigation or proceeding, for which Employee may be entitled to
indemnification under this Paragraph 11 upon final disposition of such
action, shall be paid by Employer in advance of the final disposition, to
the maximum extent permitted by applicable laws and regulations; provided,
however, that prior to making any such payments Employer shall receive an
undertaking by or on behalf of Employee to repay such amounts if it shall
ultimately be determined that he is not entitled to indemnification.
<page>
12. Suspension.
If Employee is suspended and/or temporarily prohibited from participating
in the conduct of Employer's affairs by a notice served under Section
8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section
1818(e)(3) and (g)(1)), Employer's obligations under this Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, Employer shall (i)
pay Employee all or part of the compensation withheld while its obligations
under this Agreement were suspended and (ii) reinstate (in whole or in
part) any of its obligations which were suspended.
13. Removal or Prohibition.
If Employee is removed and/or permanently prohibited from participating in
the conduct of Employer's affairs by an order issued under section 8(e)(4)
or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
Section 1818(e)(4) or (g)(1)), all obligations of Employer under this
Agreement shall terminate as of the effective date of the order and shall
be considered a termination of Employee by Employer for "Cause" pursuant to
Paragraph 10(E) of this Agreement.
14. Default of Employer.
If Employer is in default (as defined in section 3(x)(1) of the Federal
Deposit Insurance Act), all obligations under this Agreement shall
terminate as of the date of default, and shall be considered a termination
of Employee by Employer for "Cause" pursuant to Paragraph 10(E) of this
Agreement.
15. Termination by Regulatory Action.
All obligations under this Agreement may be terminated except to the extent
determined that the continuation of the Agreement is necessary for the
continued operation of Employer: (i) by the Office of the Comptroller of
the Currency (the "Controller"), at the time the Federal Deposit Insurance
Corporation enters into an agreement to provide assistance to or on behalf
of Employer under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act; or (ii) by the Controller at the time the Controller
approves a supervisory merger to resolve problems related to operation of
Employer or when Employer is determined to be in an unsafe and unsound
condition.
16. Conflict with Regulations.
If any of the provisions in this Agreement shall conflict with 12 C.F.R.
Section 30, Appendix A, or the Controller policies adopted thereunder (as
the same may be amended from time to time) the requirements of such
regulation shall supersede any contrary provisions herein and shall
prevail.
<page>
17. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of Employer, and unless clearly inapplicable, all
references herein to Employer shall be deemed to include any such
successor. In addition, this Agreement shall be binding upon and inure to
the benefit of Employee and his heirs, executors, legal representatives and
assigns; provided, however, that the obligations of Employee hereunder are
personal in nature and may not be delegated without the prior written
approval of Employer.
18. Choice of Law.
This Agreement shall be interpreted, construed, and governed by the laws of
the State of Indiana, regardless of the place of execution or performance.
19. Entire Agreement
This Agreement contains the entire agreement of the parties and replaces
and supersedes all employment agreements between Employee and Lincoln
Bancorp or Lincoln Bank, including, but not limited to that certain Amended
and Restated Employment Agreement between Lincoln Bank and Employee dated
October 1, 2007 and effective as of January 1, 2005 (the "Lincoln
Agreements"). Notwithstanding the foregoing, the obligation to make the
lump sum payment upon Change in Control, as provided in the Lincoln
Agreements and reaffirmed in the Agreement of Reorganization and Merger
Between First Merchants Corporation and Lincoln Bancorp entered into this
same date (the "Merger Agreement"), shall not be superseded or replaced,
but shall continue to be in full force and effect.
This Agreement may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
This Agreement may be executed in multiple counterparts, each of which (or
a facsimile thereof) shall be deemed an original, but all of which shall be
considered a single instrument.
20. Severability.
If any provision of this Agreement shall be held by a court of competent
jurisdiction to be contrary to law or public policy, the remaining
provisions shall remain in full force and effect.
21. Notice.
Any notices, requests, demands, or other communications provided for by
this Agreement shall be sufficient if in writing and if (i) delivered by
hand to the other party; (ii) sent by facsimile communication with
appropriate confirmation of delivery; (iii) sent by registered or certified
United States Mail, return receipt requested, with all postage prepaid; or
(iv) sent by recognized commercial express courier services, with all
delivery charges prepaid; and addressed as follows:
<page>
If to Employer:
First Merchants Bank of Central Indiana, National Association
_________________________
_________________________
_________________________
_________________________
If to Employee:
John B. Ditmars
_________________________
_________________________
or to such other address as either party hereto may have furnished to the
other party in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
22. Successor.
Employer shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business or assets of Employer, by agreement in form and substance
satisfactory to Employee to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Employer would be
required to perform it if no such succession had taken place. Failure of
Employer to obtain such agreement prior to the effectiveness of any such
succession shall be a material intentional breach of this Agreement and
shall entitle Employee to terminate this Agreement with Good Reason
pursuant to Paragraph 10(C) herein. Any successor assuming this Agreement
shall be subject to the obligations of this Paragraph 22, similar to
Employer.
23. Acknowledgement.
Employee represents and acknowledges that Employee has had adequate time to
review this Agreement, Employee has had the opportunity to ask questions
and receive answers from Employer regarding this Agreement, and Employee
has had the opportunity to consult with legal advisors of his choice
concerning the terms and conditions of this Agreement.
This Agreement is intended to supersede and replace all prior agreements,
understandings and arrangements between or among Employer, or any agent
thereof, and the Employee, or any agent thereof, relating to the employment
of Employee.
[THIS SPACE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE TO FOLLOW].
<page>
IN WITNESS WHEREOF, the parties hereto have voluntarily executed this
Agreement as of the day and year first above written.
"EMPLOYER" "EMPLOYEE"
FIRST MERCHANTS BANK OF JOHN B. DITMARS
CENTRAL INDIANA,
NATIONAL ASSOCIATION
By:___________________________________ ___________________________________
John B. Ditmars
_____________________________________
(Printed)
The undersigned, First Merchants Corporation, sole shareholder of Employer,
agrees that if it shall be determined for any reason that any obligation on the
part of Employer to continue to make any payments due under this Agreement to
Employee is unenforceable for any reason, First Merchants Corporation agrees to
honor the terms of this Agreement and continue to make any such payments due
hereunder to Employee pursuant to the terms of this Agreement.
FIRST MERCHANTS CORPORATION
_____________________________________
Michael C. Rechin, President and
Chief Executive Officer
<page>
EXHIBIT 10.1
News Release
dated
September 3, 2008
N/E/W/S R/E/L/E/A/S/E
September 3, 2008
For immediate release
For further information, contact:
Mark Hardwick, Executive VP and Chief Financial Officer
First Merchants Corporation 765-751-1857
Jerry R. Engle, President and CEO
Lincoln Bancorp 317-839-6539
First Merchants Corporation Announces the Signing of a Definitive Agreement to
Acquire Lincoln Bancorp
(Muncie, Ind. and Plainfield, Ind., September 3, 2008) First Merchants
Corporation (NASDAQ: FRME) and Lincoln Bancorp (NASDAQ: LNCB) today announced
they have executed a definitive agreement for First Merchants Corporation to
acquire Lincoln Bancorp through a merger of Lincoln into First Merchants.
First Merchants ($3.8 billion) and Lincoln ($890 million) will have combined
assets of $4.7 billion and create the largest financial holding company based in
Central Indiana. The combined company will have eighty-two banking offices in
twenty-three Indiana and three Ohio counties, a trust company with assets under
management in excess of $1.7 billion, and a multi-line insurance agency.
Mike Rechin, President and Chief Executive Officer of First Merchants, said,
"Lincoln Bancorp has a long history of deep-rooted commitment to community
banking, and will become the newest member of the First Merchants family. As a
company that has been in business since 1884, its success has been tied to the
high value it places on relationships with its customers and communities.
Lincoln's franchise fits well with First Merchants' strategic direction and
specifically its presence in Johnson and Hendricks counties, two of Indiana's
fastest growing markets. With convenience as an intended benefit, customers in
the Indianapolis market area may now enjoy access to 30 First Merchants Banking
Centers. The partnership between Lincoln and First Merchants provides Indiana
business owners and consumers with the opportunity to bank with an Indiana
company."
"Our expectation is that this combination will be mutually beneficial to First
Merchants and Lincoln shareholders. We anticipate modest dilution to Earnings
Per Share in 2009, with accretive EPS growth in 2010 and beyond, through
identified transaction synergies," Rechin stated.
<page>
"First Merchants shares our deep commitment to community banking. Our combined
strength will provide the opportunity to offer enhanced products and services to
our customers," stated Jerry R. Engle, President and Chief Executive Officer of
Lincoln Bancorp.
The merger agreement provides that shareholders of Lincoln will have the right
to elect to receive cash in the approximate amount of $15.76 per share, or
0.7004 shares of First Merchants common stock for each share of Lincoln common
stock owned by them, subject to proration as a result of a maximum limit on the
aggregate number of shares issued or cash paid to all Lincoln shareholders.
Based on First Merchants' September 2, 2008 closing price, the transaction value
is estimated between $74 million and $77 million depending on the elections of
shareholders.
The transaction is expected to be completed in the fourth quarter of 2008,
subject to the affirmative vote of Lincoln shareholders, regulatory approvals,
and other customary conditions.
The corporation further announced that Michael J. Stewart, First Merchants
Corporation's Chief Banking Officer, will also serve as President of the newly
consolidated First Merchants Bank of Central Indiana. Mike Baker and Jerry Engle
will serve as regional presidents, with continued commitment to strengthening
their local market impact.
Sandler O'Neill & Partners, L.P. served as financial advisor to Lincoln Bancorp
and rendered a fairness opinion to the company's board of directors in this
transaction. Lincoln Bancorp's legal advisor was Bose McKinney & Evans LLP.
First Merchants Corporation's legal advisor was Bingham McHale LLP.
First Merchants Corporation is a financial services holding company focused on
building deep lifelong client relationships and providing maximum shareholder
value.
First Merchants Corporation operates four bank subsidiaries including, First
Merchants Bank, First Merchants Bank of Central Indiana, Lafayette Bank & Trust
Company, and Commerce National Bank in Columbus, Ohio. First Merchants Trust
Company unites the trust and asset management services of all affiliate banks
and is one of Indiana's largest trust companies. The Corporation also includes
First Merchants Insurance Services and is majority owner of Indiana Title
Insurance Company.
Lincoln Bancorp and Lincoln Bank are headquartered in Plainfield, Indiana with
additional offices in Avon, Bargersville, Brownsburg, Crawfordsville, Frankfort,
Franklin, Greenwood, Mooresville, Morgantown, Nashville and Trafalgar. The Bank
also has 2 loan production offices located in Carmel and Greenwood, Indiana.
<page>
Forward-Looking Statements
This document contains forward-looking statements about First Merchants
Corporation, Lincoln Bancorp, the combined company, and the proposed merger,
which are within the safe harbor provisions for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include statements with respect to the expected
timing, completion and effects of the proposed merger and the financial
condition, results of operations, plans, objectives, future performance and
business of First Merchants, Lincoln and the combined company, including
statements preceded by, followed by or that include the words "believes,"
"expects," "anticipates" or similar expressions. These forward-looking
statements involve certain risks and uncertainties. There are a number of
important factors which could cause First Merchants' and Lincoln's actual
results or the circumstances and timing of the proposed merger to differ
materially from those anticipated by the forward-looking statements. These
factors include, but are not limited to: (1) competitive pressures among
depository institutions increasing significantly; (2) changes in the interest
rate environment reducing interest margins; (3) prepayment activity, loan sale
volumes, charge-offs and loan loss provisions; (4) general economic conditions,
either nationally or in the states in which First Merchants and Lincoln do
business, become less favorable than expected; (5) expected synergies and cost
savings are not achieved or achieved at a slower pace than expected; (6)
integration problems or delays; (7) legislative or regulatory changes which
adversely affect the businesses in which First Merchants and Lincoln are
engaged; (8) changes in the securities markets; (9) the economic impact of
terrorist attacks and similar or related events; (10) receipt of regulatory
approvals without unexpected delays or conditions; (11) retention of customers
and critical employees; (12) unanticipated changes in laws, regulations, or
other industry standards; and (13) those risk factors described in First
Merchants' and Lincoln's Annual Reports on Form 10-K for the year ended December
31, 2007.
* * *
First Merchants will be filing a Registration Statement on Form S-4 concerning
the merger with the Securities and Exchange Commission ("SEC"), which will
include the proxy statement that will be mailed to Lincoln's shareholders. WE
URGE INVESTORS TO READ THESE DOCUMENTS BECAUSE THEY CONTAIN IMPORTANT
INFORMATION. Investors will be able to obtain the documents free of charge, when
filed, at the SEC's website, www.sec.gov. In addition, documents filed with the
SEC by First Merchants will be available free of charge from the Secretary of
First Merchants at 200 E. Jackson Street, Muncie, IN 47305, telephone (765)
747-1500. Documents filed with the SEC by Lincoln will be available free of
charge from the Secretary of Lincoln at 905 Southfield Drive, Plainfield, IN
46168, telephone (317) 839-6539. INVESTORS SHOULD READ THE PROXY STATEMENT
CAREFULLY BEFORE MAKING A DECISION CONCERNING THE MERGER. Copies of all recent
proxy statements and annual reports are also available free of charge from the
respective companies by contacting the company secretary.
First Merchants and Lincoln and their respective directors and executive
officers may be deemed to be participants in the solicitation of proxies to
approve the Merger. Information about the participants may be obtained through
the SEC's website from the definitive proxy statement filed with the SEC on
March 19, 2008, with respect to First Merchants and the definitive proxy
statement filed with the SEC on March 13, 2008, with respect to Lincoln.